Friday, July 30, 2010

AAPT Consumer business sold to iiNet

Well, the AAPT Consumer business has been sold to iiNet for $60M. In the various announcements this is about 120,000 customers so on the old $/sub methodology a customer is worth $500. Interestingly Telecom expects the sale to decrease EBITDA by $10M while iiNet expects to increase EBITDA by $20M. Where they will find $10M of synergies that weren't available to AAPT (which owns significant fibre backhaul of its own) is interesting.

More interesting is that the transaction includes the "billing system" which presumably means Hyperbaric which cost AAPT somewhere over $100M.

Yesterday I blogged about purpose and used AAPT as a case study. The history of AAPT's consumer business alone is somewhat entertaining.

AAPT's initial business was heavily focussed on the business market - by connecting up company PABXs. In the post 1992 era a business was to be had by using the corporate pricing plans of Telstra - the Strategic Partnership Agreements (which I had a big role in creating) to access corporate discounts which were arbitraged to as resale. I also had the experience of losing the News Corp account which I was running (and we were JVing with for Foxtel)to AAPT - as News also owned almost half of AAP.

Telstra eventually (I think Feb 1995) massively revised these deals mostly eliminating the savings on local calls. AAPT at that point massively contracted its business. AAPT also commenced a long dispute with Telstra over the charges - quite frankly the billing system implemented for SPAs was never equipped to provide the functionality wholesale customers required.

However in 1998 the ACCC decided to "declare" the local call service. Both One.Tel and AAPT got into the consumer voice market in a big way - and both priced local calls at 15c when the retail price was 25c. Telstra responded with a very cute structure that included dropping the main price to 22c but expecting to return it to 24.2c with the GST (I think those were the numbers)and matching the 15c for calls within an exchange area. The Telstra plan came a bit unstuck when Richard Alston said his promise that local calls wouldn't go up under the GST didn't mean they wouldn't go up from 25c - they wouldn't go up - so Telstra got stuck at 22c.

It was about this point when I arrived at AAPT and I distinctly recall having to explain to AAPT management that the ACCC wasn't going to set the wholesale price at a number that was determined by what AAPT chose to sell calls at. Neither One.Tel nor AAPT made any money from this foray - the wholesale price never did make the call price attractive.

After Telecom acquired AAPT and changed out a lot of managers (the first of three full changes in my time there) the consumer business imposed a price change that put a surcharge on the bill if the customer didn't make "enough" long distance calls. It was the only way to try to shed 100,000 loss making customers.

But Telecom's first big strategic error was to decide to run its mobile and internet business from 2000 to 2002 as Trans-Tasman businesses - AAPT was just the "voice and data" business. Worse the separated internet business then got into a consumer business JV with America On Line. So just at the time when as a consumer business AAPT should have been building the start of its broadband business it couldn't. That AOL customer base was eventually sold to Primus.

But the latest sale I think has generated the single most memorable line from a telco media release. Two management team changes later than the first Telecom acquisition at AAPT we were having a management meeting to determine the key messages for PR. The new self-styled Chief Mrketing Officer lent forward and earnestly said "it is important that we communicate that we are customer-centric". I looked up and said "yes that is important because I'm sure that all the other telcos are saying they want to communicate that they are network-centric".

I see in the announcement from Telecom today what I thought was sarcasm was instead foresight of the eventual strategy. I quote;

"Together these transactions rationalise non-core assets, strengthen
Telecom’s financial position, and help reposition AAPT’s operations into a
focused, network-centric wholesale and corporate business that is wellpositioned
for future growth."

Thursday, July 29, 2010

Purpose and AAPT a case study

I stumbled upon an odd little group yesterday that calls itself the Ideas Lunch which is an extension of a book summary activity called Book Rapper. A pleasant enough activity.

Yesterday's lunch was on a book by Daniel Pink called Drive: The Surpising Truth of What Motivates Us.

The discussion probably wasn't that much on the book, which tries to make its theme that it is intrinsic motivation rather than extrinsic motivation (the carrot and stick of the corporate world) that motivates us. I tried to put the excessive reliance on extrinsic motivation into what I think is its correct institutional and political context.

The concept of a firm as it is applied in standard microeconomics relies upon the concept that the firm is a "profit maximiser". All the actions of the firm are understood, indeed predicated on, this being the firm's motivation and the prediction of how the firm will behave rests on it. Standard theory then suffered a major crisis when Berle and Means undertook their empirical study, published as The Modern Corporation and Private Property.

This book neatly explained why CEO's might pursue other strategies, most particularly things like a revenue maximisation rather than profit maximisation. The response of economics was not to change their theory to match behaviour, but instead to mount an attack on what was labelled the principal/agent problem. And thus began the tradition that mouths "the purpose of the firm is to create shareholder value".

But this is patently a nonsense. It describes neither the history of the development of the concept of a joint stock firm, nor the process by which any individual firm comes into being. The history of the firm as a concept was the development of big or risky projects - initially major sea trading expeditions and "city" works projects - that could not be accomplished without sharing the risk or adding capital from multiple sources. In all cases the purpose - the voyage or the sewerage system - preceded the capital formation.

The same is true of any other new business. The fundraising prospectus does not say "let's form a company to deliver shareholder value" it says "we have identified this market need and by doing these things we can meet that need and pay investors a return for their capital employed". The real "purpose" of the company precedes the generating of the return to shareholders, but return to shareholders is still a necessary condition.

This feeds into motivation by understanding the work of Blake and Moutton in
The Managerial Grid. This book suggests that managers make a choice between focusing on the task and focusing on their people. They describe a manager as sitting on a Cartesian grid of these two dimensions. A (9,0) focuses only on people a (0,9) focuses only on the task.

They suggest most real managers are "statistical (5,5)'s". That is one day they worry about the task then the next have a staff picnic to worry about the people. But they also suggest that managers can be a (9,9). The path they build rests on the fact that people feel happy when they can understand their contribution. So by being clear about the task and how it contributes to the firm's purpose and encouraging them an d supporting them can result in a focus on the task AND on the people.

Of course the success of the strategy needs a firm purpose that is grounded in what the firm exists to do - not just how it pays for capital. My thesis is that the vision and mission "thing" is vital to company success.

The reference to AAPT is fed by the plethora of stories about the impending sale of AAPT. It made me think about the varieties of telcos and how they succeed or fail.

AAPT grew out of the news service AAP. When AAP started selling news services direct to corporates in the 1980s they fell foul of the rules prohibiting "interconnection". AAP became a leading firm lobbying for change to the rules, and then put its money where its mouth was and spawned a competitive telco. As such the company always had a purpose - to bring the benefits of competition to telecommunications users.

When the firm was acquired over 1999-2000 by Telecom New Zealand this changed, not least because the parent firm didn't believe in that purpose. Telecom itself attempted a project in about 2004 to define its own purpose beyond generating shareholder value. It composed a very powerful narrative of its purpose as being to fulfill people's need to communicate. Unfortunately it was never allowed to dominate the strategy discussion (and I think the whole episode is left out of Theresa Gattung's memoir Bird on a Wire.

As AAPT lost its purpose the next generation of "telco" found theirs. What defines Internode and iiNet is that they are companies driven by people whose passion was to make the Internet available to everyone. I don't think Simon Hackett or Michael Malone sat down and said "I can make money by being an internet service provider". The reason for building an ISP from scratch was so they and their mates could enjoy the Internet.

A company's "purpose" doesn't have to be "causal" - the need of people they want to satisfy can be mundane or even outright evil. But to be truly successful the company has to know and explain what is the purpose that comes before "making money".

Monday, July 26, 2010

What do we make of Indonesia

So Indonesia plans to implement its porn filter by Ramadan.

I like this bit;

What about Internet users who can still access porn sites despite the block? “The thing is, those who can overcome technology are limited in number,” he said.

That might be a good line for Senator Conroy.

The citizens assembly

Julia Gillard's announcement of a "citizens assembly" to build consensus on climate change has come in for a great deal of criticism.

One stinging line is "isn't the Parliament just that" - it is an assembly of 150 citizens.

Laurie Oakes writing in News Ltd papers on the weekend said;

She is saying, in effect, that Parliament as an institution no longer works.

Also, by promising that her citizens' assembly would be "genuinely representative of the wider Australian public", she implies that the Parliament is not.

Funny thing is that that is exactly what she is saying - and it shouldn't be news to anyone. Ever noticed that actually without "party discipline" there would have been a majority for the Rudd-Turnbull plan for an ETS? One could get picky and also pint out that it wasn't a majority in the HoR that th ALP was lacking, it was in the Senate.

And for those who want to mount the charge that Rudd should have gone for a double dissolution, the only response is that there were some bad tactics - yes - but not a lack of will. The bad tactics were due to leaving the outcome to eleventh hour negotiation which then collapsed under the coalition leadership change. As a consequence the amended version had not been passed by the reps and defeated by the senate before rising in December.

Labor was then unable to get a vote brought on in February to allow the bill to be rejected to set it up for the next time to get it rejected again. This then hits the wall on the time limit for double dissolutions that cannot be called too close to when a half-senate election can be held.

But back to Oakes, he says.

She may well be right on both counts, but surely the answer is to reform Parliament - not set up other ad hoc bodies to take over its role.

Well, I agree with him on that. The solution is to convert the reps back into an assembly and not an electoral college for choosing the Executive. To do that we need to directly elect the executive.

or that we need a new political party - I want to call it the Australian Republican Party. I bizarrely want it to first campaign for the 2011 State election.

Immigration and population

On Crikey's comments section I defended the PM's position of wanting to craft a sustainable population strategy rather than an immigration strategy. It is all too easy to mask a xenophobic response to immigration under the guise of concern with levels.

I typified the distinction as Labor says we need to match immigration intake with our capacity to build supporting infrastructure, while the Liberals say we shouldn't have much immigration because we won't spend on infrastructure.

It transpires I'm wrong, because Tony Abbott and Scott Morrison can't count. Firstly the Oz reports that Tony is misusing statistics to claim that immigration rose to 300,000 under Labor. Secondly they reported that Tony's target number is already higher than the figure already factored in to Treasury's population forecasts.

This is the sort of "what's the GST on a cake" error that can cost a leader all credibility.

Thursday, July 22, 2010

The e-book revolution

Amazon is now reporting that e-books for the Kindle are outselling hard copy books at Amazon. Perhaps that is not surprising for on online distribution company.

One analyst is quoted as saying "Book lovers mourning the demise of hardcover books with their heft and their musty smell need a reality check". As a booklover I feel no sadness at all - my Kindle is delightful. I can carry a heap of books at once - actually if I'm in 3G coverage I can have my whole library with me. The Kindle is lighter than most books, I can vary the font size (there are some books - Simon Scharma's Citizens being one where I struggle even wit my glasses), and e-ink is really really easy to read.

Plus my book is delivered within minutes of buying it. The biggest problem we're likely to have is the operation of marketing "windows". That's the process whereby books are released first in hardcover, or large format paperback, at a higher price than the paperback - that higher price is not the extra cost of the different binding. It is simply a price discrimination practice to extract the most consumer surplus possible from the "early adopter(reader)".

What we need is Amazon and publishers to agree that price discrimination on early release e-books is okay. Whether there needs to be some other "content" (author interview?) that comes with the premium priced initial release is the question.

My note to all Australian authors - get your books published on Kindle and every other e-reader platform.

Wednesday, July 21, 2010

Political Belief

Vic N (yes I know who he is) posted a comment on a recent item where I raised the point that it is okay to change your mind in the face of new facts. The reference there was to the reluctance of some people to own up to their previous beliefs and be prepared to explai why they had changed.

The post from Vic referred to some research. While the published version requires a subscription, there is an earlier working version available on line.

The it is worth quoting extensively from the conclusions of the paper.

The experiments reported in this paper help us understand why factual misperceptions about politics are so persistent. We find that responses to corrections in mock news articles differ significantly according to subjects’ ideological views. As a result, the corrections fail to reduce misperceptions for the most committed participants. Even worse, they actually strengthen misperceptions among ideological subgroups in several cases. Additional results indicate that these conclusions are not specific to the Iraq war; not related to the salience of death; and not a reaction to the source of the correction.

Our results thus contribute to the literature on correcting misperceptions in three important respects. First, we provide the first direct test of corrections on factual beliefs about politics. Second, we show that corrective information in news reports may fail to reduce misperceptions and can sometimes even increase them. Finally, we establish these findings in the context of contemporary political issues that are salient to ordinary voters.

These findings seem to provide further support for the growing literature showing that citizens engage in motivated reasoning....

It would also be helpful to test additional corrections of liberal misperceptions. Currently, all of our backfire results come from conservatives – a finding that may provide support for the hypothesis that conservatives are especially dogmatic...

[F]uture work should seek to distinguish the conditions under which corrections reduce misperceptions from those under which they fail or backfire. Many citizens seem or unwilling to revise their beliefs in the face of corrective information, and attempts to correct those mistaken beliefs may only make matters worse. Determining the best way to provide corrective information will advance understanding of how citizens process information and help to strengthen democratic debate and public understanding of the political process.

In this the matter is very similar to the field of "risk communication" which I became familiar with on the issue of health effects from EME. Just telling people that the science shows it is "safe" doesn't work and can indeed backfire. The essential first step is to acknowledge their concerns before giving them the facts.

I would suggest the same issues emerge with climate change, no amount of "fact" or "science" helps change the position of the "climate change deniers". However, from personal experience, you can make progress if you don't rely on the science as the only tool. Most importantly if you acknowledge the denier's concern that the wrong policy could damage the economy and that reacting is a risk weighted assessment rather than dogmatically "right" can achieve change that doesn't occur by stating the "facts" alone.

In this I think I pick up an earlier post in which I exhorted scientists to be "humble". Interestingly Vic N commented on that earlier post...but now perhaps the "science" is in, to be persuasive you need to do more than restate the "facts".


Maybe there are some policies...

I've already bemoaned the tendency to report politics as personality or a horse race. However a flicker today that policy could surface.

John Durie writing in the Oz has gone back to Joe Hockey's budget reply speech and has questioned the worth of a review of competition policy. In doing so he seems to channel a Craig Emerson press release from 18 June. Some excerpts are woth quoting.

An obvious problem with the law promising to do so much is that it will plainly fail, because contrary to the view of some, its intent is to promote competition to help consumers -- not special interest groups.

This rules out small-business handouts for a start.

The new government will in fact have a big say in the future of the law because existing boss Graeme Samuel is due to step down in the middle of next year and he won't be seeking another term.

Maybe the Liberal Party will deliver the throne to University of NSW professor Frank Zumbo, who has had a hand in some of the more distorted small-business-oriented changes, like the so-called Birdsville amendments, which boosted section 46, which aims to stop abuse of market power. ...

If the review was aimed at simplifying the law rather than being a smokescreen for fictitious, unenforceable or contradictory small-business gifts, then maybe Hockey is on to something.

Former boss Alan Fels argues the competition sections could be scrapped in favour of one sentence: Any behaviour that substantially lessens competition should be prohibited unless it can be shown to be in the public interest. He has a point. Australian law should be allowed to settle, to allow the courts to set the parameters.

The underlying difficulty with all this is that the concept of "competition" is not as well defined as those commenting on it (including economists) would like to think, nor exactly what the benefits of competition are. A "standard theorist" from the orthodox or neo-classical school would talk about competition as the efficient ideal in which producers price at marginal cost. As Steve Keen has succinctly demonstrated the standard theory fails because costs don't start to rise and that individual firms face the same downward sloping demand curve as the market.

Does this mean we should give up on competition. No, because competition actually generates innovation and competition (or the market) does work as a mechanism that reveals preferences and costs across the economy. To put it simply, a central planner could set prices at cost - but they couldn't figure out how much of what to produce.

But markets have lots of design elements and all of these need to be considered to see the outcome delivered. The one thing that is sure to destroy the value of markets is excessive concentration. But equally relying upon "ease of entry" is not sufficient.

So yes the kind of intervention that worries about the survival of individual competitors is probably a good thing, not a bad one. In his defence from the attack by the Minister Assoc Prof Frank Zumbo wrote

Perhaps the Minister’s time could be better spent explaining why Australia consistently has some of the highest levels of food inflation in the developed world which is pushing up grocery prices for Aussie families.

He has a point.

Finally all of this has to be better than the other policy issue - the anti-filter brigade being driven to the choice of The Sex Party given the inability of the Pirate Party to get themselves organised.

Monday, July 19, 2010


It was like this .... At his cabinets, it was absolutely forbidden to discuss in front of [him] his chronic failure to present a personality or fashion a vision with appeal to voters, his lack of capacity to run an orderly and collegiate government with a coherent long-term strategy and his crippling inability to remedy any of these flaws, whatever help he was offered. As a result, to use [a] word, they were "f**ked".

Sounds familiar? yet another background comment on Kevin Rudd?

Actually no this is on Gordon Brown from The Guardian. I've previously noted on comments of envy from the UK on how the ALP managed to do what British Labor couldn't.

The Guardian article makes a good read. It tells the tale of a Prime Minister (Blair) constantly under attack by a Treasurer (Chancellor Brown) and states;

There was unquestionably fault on both sides. But the greater part of the viciousness of the ugly Blair-Brown civil war was sourced in the Scotsman's consuming and utterly unreasonable resentment that he was not the leader. When he did finally lever out his rival, many of Brown's colleagues, even the prime minister he had putsched, prayed that he might be transformed for the better once his ambition was finally satisfied. The reverse proved to be the case as he was overwhelmed by a job that was much harder than he anticipated. As his premiership floundered, he became even more paranoid, chaotic and volatile.

For us that could sound like the all consuming story of both Hawke/Keating and Howard/Costello. In the end Hawke and Howard were both right - you have to get the bloke to blast you out not simply hand it over. Blair/Brown seems to fall in the middle - Blair handled the issue the same way with deferrals and future promises but in the end did "honour" the deal even though he (apparently) knew it was the wrong thing by the party - just as I suspect Howard handing over to Costello would have been.

But to our own case. Julia and others who have defended her have said that she moved because she was concerned their standing in the polls suggested Work Choices could make a return. To a degree she can already claim victory as Abbott has at least made a one term promise (core or non-core? s it written or was it the answer to a question?) not to change the Fair Work Act.

But really she could go further. She and her colleagues realised the failure that was Rudd's management style, including the non-use of Cabinet. Was the right choice for Australia the ALP under Rudd versus the coalition or did we the citizens deserve the choice between what the ALP now believes is its best choice versus the coalition?

It is the one feature of a Westminster system over an executive presidency that is perhaps worth preserving. The Parliament - whether by the rearrangement of allegiances that changes parties (e.g. Hughes and the Nationalists, formation of the UAP)or members of a Parliamentary Party can make a decision that some other of their number is a better choice. The other beauty of three year terms, compulsory voting and non-fixed terms is that ultimately the issue gets egularly decided by the governed.

How red are the Greens?

One of my themes here at "Anything Goes" is that it is okay to consider multiple theories (of anything) and it is actually okay to change your mind ... in fact, it is a good idea to change your mind in the face of new information that contradicts a previously held theory (if there is another theory available).

Consequently I don't share with some a concern that a person might previously have been a communist or fascist and is now campaigning as a democrat of some kind. (see note below)
However I did find the entry in Gerard Henderson's Friday issue of Media Watch Dog. In this he details some of Lee Rhiannon's personal background as a member of the Communist Party of Australia and the Socialist Party of Australia as revealed in Mark Aarons new book The Family File.

Now I have no difficulty with the fact that in the late 60s and early 70s people could still find full-blown Leninist-Stalinist communism attractive. I do find it hard that the Soviet could be defended after the details of the Terror became known or after the 1968 Czech invasion. But in global politics it was reasonable to think of the peasant communism that was Russia as being a solution to the need for rapid development of the colonies being freed from European empires.

Personally, I've always happily subscribed to being a socialist, but never a revolutionary socialist. And these days I'm that horribly confused beast that I describe as a "market socialist".

But if someone like Lee Rhiannon is going to hold herself out for public office as a potential Senator for NSW her Communist/revolutionary socialist past needs to be acknowledged in her official campaign biography.

My flirting with the Democrats leading up to the 2007 election was spurred by my dislike of the Greens, populated as I believe it is by many former communists and unreconstructed Trots. My thinking was that progressives who were uncomfortable with the ALP's internal ethos (aka the NSW Right and all it stands for) and organisational structure (unions having 50% vote at all conferences)needed a viable non communist alternative.

The fact that Rhiannon won't disclose her history suggests that she doesn't disown it - a vote for the Greens in NSW is a vote for a revolutionary socialist. Unfortunately this time the Greens might just get up in NSW. It looks like I failed.

Note: I also don't necessarily think that all those communists in the in the late 30s who sided with Soviet Russia and hence against war with Germany were necessarily absolutely wrong and by implication Nazi sympathisers. Certainly Stalin himself didn't expect the pact to last forever - but they had a common enemy in parliamentary democracy. The two of them were always going to fight it out and really the treaty achieved Stalin's aim - that Russia and Germany did not have to engage till Germany was already overstretched to its West. The treaty was a tactical error by Hitler - who in entering it abandoned his first option of a partnership with Britain to wage war to the East against communism. By being a little more patient that strategy could have been achieved.

Thursday, July 15, 2010

Gravity, string theory and emergent phenomena

An interesting report in the New York Times on a paper by Erik Verlinde which outlines the possible start of a new theory of gravity.

Let's start at the beginning. Verlinde is a "string theorist" like about 95% of all physicists currently working in fundamental particle physics. String theory is the current leading (only) candidate for the great desire of a unified theory of physics.

However string theory itself has its critics. In books like Not Even Wrong and The Trouble with Physics the practice of string theory is heavily criticised both for its failure to generate testable results and its failure to provide any kind of explanation.

Without delving into the philosophy of science too far these are the two most common tests of "science" - that its results are testable (or falsifiable) and that the consequence is that something complex is "explained" (typically for example the trajectories of the planets explained by the force of gravity).

As such your standard string theorist would not be the prime candidate for a philosophical discussion. They are better known as incredibly smart individuals creating increasingly esoteric and largely irrelevant mathematical models. As the article states "Dr. Verlinde is not an obvious candidate to go off the deep end. He and his brother Herman, a Princeton professor, are celebrated twins known more for their mastery of the mathematics of hard-core string theory than for philosophic flights."

The article rather inaccurately describes the paper. The paper does not make the "contention that gravity is indeed an illusion". The paper actually claims that gravity - and indeed space itself - can be derived as emergent properties of a simpler universe "using only space independent concepts like energy, entropy and temperature."

Indeed as the newspaper article notes Dr. Verlinde explained “This is not the basis of a theory. I don’t pretend this to be a theory. People should read the words I am saying opposed to the details of equations.”

What is, however, is the first attempt to bring some of the learnings of chaos theory and statistical physics to the issues of fundamental particles. Up till now gravity has been required in the theory to exist between all objects of "mass" - and is a force that has to be reconciled in particle physics. The approach in the paper says that we can construct models of fundamental physics in which the "observable" phenomena of gravity are emergent properties of the underlying system.

Whether Verlinde's paper will be the basis of an actual theory or whether it will merely be a signpost to a theory that treats certain concepts of 20th century physics as emergent phenomena is yet to be revealed.

I have no scientific basis to believe this, nor the mathematics to come to grips with it. But quite frankly it seems "right". As a philosophical concept it requires a reconceptualization of the concept of "reductionism" which has mostly been thought of very mechanistically. In fields as diverse as psychology and neuroscience and economics the failure of the simple concept of reductionism in the face of complexity has been slowly developing. It is not surprising that it will come to physics too.

Note: The NYT article says

Lee Smolin, a quantum gravity theorist at the Perimeter Institute for Theoretical Physics, called Dr. Jacobson’s paper “one of the most important papers of the last 20 years.”

Smolin is the author of "The Trouble with Physics".

Sidere mens eadem mutato

The re-branding of the University of Sydney is again in the news. I wrote my own brief comment earlier when the new logo was revealed (incorrectly saying "starts may change" rather than "stars may change").

The University's own website explanation of the logo says;

If a literal translation is required, then "The constellation is changed, the disposition is the same" is perhaps appropriate. The ablative absolute in Latin can be used in place of a number of other constructions. Here it probably has a concessive force. "though the constellation is changed..." sidus means primarily in Latin 'a group of stars', 'a constellation'. To translate simply 'star', as many of the suggested translations do, is incorrect. Again, mens in latin has a much wider range of meanings than 'mind', 'the mental functioning of human animals': here, the sense is clearly disposition, e.g. towards learning and scholarship.

Hence it is easy to arrive at the general sense: "The traditions of the older Universities of the Northern Hemisphere are continued in here in the Southern."

The comments by Stuart Rees are that the re-branding is an expensive and largely pointless exercise driven by "management". I somehow think that that's entirely appropriate for the latin motto. Nothing Sydney is doing is any different to the "marketing" efforts of any northern hemisphere university.

And there perhaps is the rub. Success in a managerial or leadership sense doesn't come from being the same as everyone else - it comes from being different.

Friday, July 09, 2010

Horse race reporting masquerading as political coverage

Many thanks to Gerard Henderson for finding the about face reported below. It follows the comment I recorded of Malcolm claiming the media treats politics as "personality or the game" - which here on in I'm going to call "celebrity or the contest".

If Michelle Grattan had focused on reporting and analysing the policy rather than its electoral appeal she wouldn't have got into this mess.


Michelle Grattan On Why Julia Gillard’s East Timor Solution Is Oh, So clever.

Julia Gillard is devilishly clever. Her asylum seeker policy is a masterstroke of improvisation. And she’s tapping into community hostility to boat people with an empathy driven by Labor’s focus groups, while keeping her tone oh-so reasonable, scolding Tony Abbott on the way through. No wonder some refugee advocates initially weren’t sure whether to like or hate it…. The core of Gillard’s policy is a proposed regional processing centre in East Timor. - The Age, 7 July 2010

Michelle Grattan On Why Julia Gillard’s East Timor Solution Is Not So Clever After All

Julia Gillard is dancing an election jig atop a tightrope. Her bold pitch on boat people shows how much she is willing to dare for the sake of votes. It has also raised wider issues of what she stands for, the way she goes about things, and even whether she will be up to the job… Gillard might have been deputy PM for the best part of a term, but how she would go as a long-term leader is anybody’s guess - and, arguably, becoming harder to predict as she shifts position to get rid of problems and then to deal with subsequent consequences. - The Age, 9 July 2010.

Tuesday, July 06, 2010

Theory of the firm and Stakeholder Theory

My post earlier touched on the question of whether firms have an interest in the efficiency of the markets in which they compete.

A possible counter to that is that profit maximising firms cpossibly would, but ever since Berle and Means wrote The Modern Corporation and Private Property it has been known that managers can be driven by other values like revenue maximisation.

At the same time the field of Stakeholder Theory has gathered significant academic research. Ultimately this is the view that the firm owes obligations to multiple stakeholders not just equity investors.

Ultimately though this can resolve to the points raised by John Kay in Obliquity that the best way to deliver return to shareholders is to manage to the interests of all stakeholders. You don't maximise profit by planning to maximise profit, you maximise profit by serving your customers well, caring for your environment and developing your human resource base.

Which makes one think of poor BP - who tried to go green with their Beyond Petroleum logo, but now are reportedly at risk of collapse from the problem in the Gulf. Personally I can't believe that as there must both be insurance of some kind, and I'd have thought some liability from Halliburton who actually performed the work that failed.

It should however be a reminder to all that risk management and stakeholder analysis are as or more important than financial planning and developing the dividend policy.

New directions in regulation

Watchers of this page might note that I take an interest in the theory of regulation. I have brewing inside me a major work on the competition policy in telecommunications, but I have written on the approach to regulation recently.

The release of the Cooper report on superannuation provides an interesting case of the trends in regulation. The report focusses on questions of why competition is not delivering all its expected "benefits" in superannuation. Chapter 4 of Part 1 of the report addresses "The Super Fund Member" and commences;

A key tenet of the 1997 Wallis Report was that super fund members should be treated as rational and informed investors, with disclosure and market conduct controls being the main regulatory instruments with which to oversee the industry.

Later it states;

These realisations about financial literacy and engagement have led the Panel to propose the new ‘choice architecture’ framework for the Australian superannuation system that is detailed in this report. This framework is an adaptation of contemporary thinking in the field of behavioural economics. This field is currently being applied overseas to a variety of complex public policy challenges involving consumers ‐ for example, in the fields of health care, child nutrition, road safety and sustainability, as well as retirement savings.

The key tenet of this approach is the concept of ‘libertarian paternalism’ – the idea that the
outcomes experienced by inert or disengaged consumers should have inbuilt settings that most closely suit those consumers’ objective needs, as assessed by the expert providers of the product or service in question.

It could be noted that exactly the same tenet the report found in Wallis can be found in every other policy review from the mid 1980s on. While the Productivity Commission conducted a worthwhile seminar on behavioural economics and public policy, in its report on the Australian consumer policy framework the PC wrote;

Accordingly, the findings from behavioural economics, even if accepted without demur, are unlikely to require an overhaul or major redirection in consumer policy.

Specifically the Commission considered the option of specifying "default" options but somehow concluded there was an error risk in setting this incorrectly and assuming that the policy would create additional costs for the informed consumer. The PC wrote;

Many of these considerations evidently apply to all regulation making, indicating that designing policy responses to the issues raised by behavioural economics is not overly different from responding to more traditional problems such as externalities and the abuse of market power.

Hopefully the Cooper review is the start of a more informed policy response.

Meanwhile of course the industry is reported to be concerned that these policy initiative will actually drive up costs. It really looks like the usual concern from industry that a policy proposal designed to save consumers money is perceived as being to deny industry profits. The reality is that firms should share the interests of their consumers in having efficient and well working markets so they really can compete on the basis of their competencies not their inherited attributes.

Note: If all of the above on default options and behavioural economics is hard to follow I suggest you read Nudge by Thaler and Sunstein.

More on commies...

Following o the stories of commies in the ALP I wrote about yesterday, one of the Hawke Ministers named as having dual membership, Arthur Geitzelt, has said the claim is false.

It is interesting that the original claim by Mark Aarons as reported wasn't that he knew from his father's records as Secretary of the CPA that the two Senators - Geitzelt and Childs - were CPA members, but that it was the ASIO record that they were. After all the book is about the ASIO record not the family archives.

It reminded me of a story my father told of his time as a Lt Col in the CMF (now Army Reserve). He proposed to promote a young fellow to Corporal in the Field Ambulance he ran. He was visited by the spooks who told him he couldn't promote him because he was known to meet with communsts. It transpired that the fellow's real job was as a musician and that the spooks had observed him going to work at a club where communists were known to meet.

I'd suggest everyone have a Bex and a good lie down before they take as truth anything they fin in a ASIO file - especially one constructed any time before the Hope royal commission.

Monday, July 05, 2010

Telecoms Stuff

One aspect of the Government's new deal with Telstra and the NBNCo is the revision to the process of USO delivery. This could be either done very well - by realising how few people actually need a subsidised service - or very badly - by perpetuating the myth that the copper network has existed as a "carrier of last resort".

Meanwhile I've thought that the approach the RTIRC took had a lot of merit of defining a standard, and then the government procuring services to meet the standard if suppliers didn't.

What I can't understand are the reports today because a Finnish Law of October last year came into force. I don't know how passing a law that someone must offer something actually makes it come to pass. How is it structured to require all providers to be able to offer a service to one new dwelling outside the network fotprint?

Equally misleading has been the headlines saying Finland has made the Internet a "right". I don't see in these reports anything other than a right to access a 1Mbps service - our Government's promised us a right to a 12Mbps service and through the ABG we already have a right to a broadband service.

Meanwhile our friends at Telstra and Huawei have announced a first in the trial of FDD LTE in the 1.8 GHz band. Telstra said that it "expected that this spectrum will complement 2600MHz spectrum and the 700MHz band anticipated to be made available through the digital dividend." Apart from potentially being misleading in suggesting the 2.5/2.6 GHz band is being cleared by the digital dividend (its not the ACMA is relocating ENG services - a task that Telstra needs to cooperate in to find the new home for ENG), it begs the question of whether once 1.8 GHz can be used for LTE there is a need for all the extra spectrum that they want allocated.

I know President Obama has told the FCC to go find 500MHz more spectrum for wireless broadband - but no one can quite figure out where to get that. If you accept that the best spectrum is between 300 MHz and 3 GHz that 500 MHz is about one-fifth of all spectrum. There are better ways to use the spectrum more efficiently, the question is whether we will find a pathway to do so.

The other lot against democracy ... and understanding the NSW Right

In other democratic news, Bob Carr has written about Mark Aarons new book The Family File.

The book is the tale of one family's involvement in the communist cause over four generations. What Carr regards as explosive in the book is the revelation that many leading left-wingers in the ALP were also CPA members. Paul Norton has written that these aren't much in the way of revelations.

He goes on to try to describe two kinds of anti-communism - one being against specific instances of communism, and the other (an essentialist anti-communist) as being against the philosophy. He tries to argue that some kinds of anti-communism makes you a fellow traveler with some vicious regimes of the right. However, "my enemy's enemy is my friend" is a well-known fallacy in politics and diplomacy - though often breached - witness the Taliban.

Actually anti-communism is probably just as valid as being anti an islamist caliphate. Certainly there has always been a fine dividing line between the theoretical description of communism as a giant co-operative and the actual detail as fundamentally anti-democracy. Ultimately to be anti-communist because every instance has been anti-democracy is actually a pretty good place to be.

What is more important for everyone to understand is why the NSW Right of the ALP is so different. As the party split around the country and the anti-communists left the party stayed together in NSW. The right did not have a name till Paul Keating named it Centre Unity, while what is now the Socialist Left was known as the "steering Committee". Ultimately that division then crystallised around the real meaning of "democratic socialism".

The NSW Right's machine capabilities and reputation evolved as its means of ensuring the left was subjugated. As Freudenberg noted in Cause for Power, once the left agreed to "power sharing" the jig was up.

While Carr is right to note the important role of Whitlam and NSW the question is how relevant they are today. They are no longer battling a nascent communist core. The NSW Right has got used to exercising power for power's sake.

The person who will pick up Whitlam's mantle of reform is the person who challenges the NSW Right and reforms its approach to power.

Islam and democracy

One of the key issues raised by Phillip Bobbitt in Terror and Consent is that need to understand that "radical" Islam is opposed to the very idea of democracy.

It should therefore not be surprising to hear of cases of Islamist groups calling on Australian Muslims to spurn secular democracy and Western notions of moderate Islam and join the struggle for a transnational Islamic state. It is important to realise that this is not a universal view of Islam, and the specific group is outlawed in much of the Middle East.

The position explains in part the ongoing challenge of Afghanistan. Firstly we are naive to believe that simply inviting people to participate in democracy will make it so - democracy depends upon a universal acceptance of its precepts. Secondly we are naive in not understanding the overall resentment by people who have been colonised and fought over by others to yet another group of "colonisers" no matter how well intentioned their mission.

But most importantly we should not be surprised about the joining of church and state in Islam. Our own Western democracies had to battle the conjunction of the Catholic and Orthodox churches with the monarchical state. Even today Australia's ultimate "head" is a monarch who is also head of an establishment church - and a position that specifically excludes persons of the faith of the current leader of the opposition.

To be convincing in our claims for the benefit of democracy we need to ensure that democracy truly is founded on a secular state.

In which Lisbeth ...

For fans of The Girl with the Dragon Tattoo and the other Millennium novels, this short item from The New Yorker puts it all in perspective!

Thursday, July 01, 2010

I surrender

Having received yet another comment that I need a spell checker to pick up my typos in my blog posts - and despite changing my description at the top of the post - I've installed Google Chrome as a new browser so that I have a spell checker without having to change blog software (currently blogger).

So fr it woks will - rather so far it works well, but didn't correct anything to the left of the dash! So it won't be perfect.

On justice and victims

Australia's media has taken to reporting on cases before the courts on the premise that the justice system is about justice for victims and that the end of the case is about that horrible meaningless word "closure".

The reporting of the Dr Patel case is an example -
the SMH headline was After five years, some justice for Patel's victims
the ABC led with Guilty verdict brings relief for Patel victims
Channel 9 wrote Victims find closure in Patel guilty verdict

The web version of the SMH story showed video (from Channel TEN) of one victim saying it was good to see justice done, not that there was justice done for him. The Channel Nine report quoted a victim sayin "It's just all confusing, but I'm just so happy ... I'm free, I'm free....It's closure alright." The construction of that reply suggests the word closure was offered by the interviewer in that annoying question "does this verdict give you closure?"

We need to understand that the purpose of our justice system is to enforce our social rules. When the system works it is working for all of us equally, not just those who were unfortunate enough to be victims in the specific case.

And those who supervise Australia's working journalists - the editirs and ultimately the owners of media - need to improve the standard of reporting.