Interference Discount – More evidence

The Federal government’s relatively comfortable budget position has seen the re-emergence of a more active industry policy in Australia. The recent home insulation program is one example of how industry policy can be used to distort markets leading to a rush of resources to a niche sector. When the policy fails, the structural adjustment is painful and, in this case, results in another band-aid being applied. A similar scenario appears to be playing out in parts of the solar industry.

Leveraging Technology

Im not an early adopter of technology, I don’t consider myself to be tech savy. As a part of setting up this business we have been pushed into areas where we have a limited knowledge base – the questions we have addressed are along the lines of – what server will we get? Actually what is a server and do we need one? What internet connection will work for our needs with multiple users? How do we design and maintain a web site? Who is the most suitable market information provider? Do we use Microsoft software or look to go it alone with freeware?  

Going through the decision making process and now living with the results my overriding impressions are how inexpensive the investment is and how well it all works. For a relatively modest investment we have a phenomenal ability to search, sort, broadcast and store information. The change I am noticing is even maybe ten years ago we had a strong sense for what was possible with a database where as today there are lots of databases that we regularly use and delight in their ease of use and breadth of information. My sense is how well technology works and how generally accessible it is has meaningful implications for barriers to entry for existing business structures, for pricing and for business formation. I think this is particularly relevant for a small economy like Australia where we have seen certain businesses and industries earning what appear to be excess returns due to limited competition.

USD / debt / gate keepers

Friday afternoon … tracked down the Fed Govenors’ speech referred to in an earlier post – link to speech follows. Clearly the US has some very significant issues to manage, my sense is though the broad public awareness and open dialog is the initial phase towards a substantive positive change. They appear to have or at least be heading  towards having the mandate to move in this direction.    

• Governor Kevin Warsh’s Speech 

Outliers ….

SMH ran an article today about a 73 year old Boeing engineer Mr Dongfan Chung, who is a US citizen working in Huntington Beach. Mr Chung was arrested and sentenced to 15 years gaol for spying. Sitting at a desk in Sydeny focussed on corporate governance, disclosure and transparency issues the idea of a government supported industrial espionage program always strikes me as something more likely to be a Jason Borne script than a genuine issue.  Always seems odd (to me at least) when someone actually gets arrested, leaves me woundering where the truth really lies.

• US Judge Tells China to stop sending its spies 
• The highly sensitive art of doing business in China

USD / debt / gate Keepers

• AFR page 21 – Fed Governor Kevin Warsh analysis of the reform agenda to date “the economy runs a grave risk if we slouch towards a quasi – public utility model”. Track down detail.  

Interference discount

 … Add Telstra Bill to list

Interference discount

Hard to pick up a paper since Christmas without reading about one or more of:

• Henry Review; Australia’s current “root and branch” review of its tax system. The breadth seems to range from a national based resource rent tax to a review of the excise tax regime for alcoholic beverage producers;
• Cooper Review of superannuation;
• Productivity Commissions review of gambling; and
• Mr. Ahmed Fahour’s appointment as the new Australia Post Md and CEO

Sense shift towards increasing government influence and regulation – Worries me that market will discount for the specific events above, in the individual industries, but then apply a grater discount to the whole because of uncertainty of what coming next. Concern is just seeing a wealth transfer from the private sector to the public and related entities without the support of effective grass root initiatives to drive competition and genuine longer term innovation.  Will maintain the list going forward and expand with fuller background.