What we can learn from a Samsung Galaxy mobile

A colleague and I had a lunch the other day and we got bogged down with the current state of affairs in New Zealand:  crime problems, education problems, roading and...

A colleague and I had a lunch the other day and we got bogged down with the current state of affairs in New Zealand:  crime problems, education problems, roading and other infrastructure problems, health problems and sadly even racial problems.  The reasons for all of the above will be plentiful but all may have a common thread, indeed I am sure they do:  New Zealand is a small, low-growth and low-income economy which simply means we don’t have enough income, assets and/or wealth to fund all the spending requirements we have and want if we are to believe we are a first-world or developed economy.  Our discussion certainly risked heading down a more and more depressing track but we wrestled ourselves out of potential gloom and started to talk about how to grow, build and develop a great country.   Of all the countries we discussed, South Korea was a very clear example of success.

Revered Harvard academic Professor Michael Porter visited NZ in late 1991.  I remember it well having spent part of my studies reading about his now famous “Five Forces”.  During one of his interviews, he held a pound of NZ made butter in his hand and said something like “this is what you guys do and are really good at it”.  From his other hand he produced a Sony Handycam and said something like “this is what they do in Japan and they’re really good at it.”  The point he was making was that the layers of value-add in the process to deliver a Handycam to market are so extensive and the value chain so deep that it creates serious income and wealth for all the participants.  Indeed, the foundations of an advanced economy and that the income and wealth created therein is ample to fund society’s spending requirements.  We just don’t have these sorts of value-added sectors across the board here in NZ, even now some 30 years on from Porter’s visit.

The way I remember the situation being explained when I was at university is that you need to get into the mindset of what the ‘vitals’ are for an economy for it to function well – to think about a country as you would a human body and what the important parts of it are to make that body the best it can be:  replace organs with the word infrastructure, the brain is our schools and universities, the heart is the power sector, the veins are our roads and transportation infrastructure etc etc.  For the body to be performing well all these organs need to be functioning properly and it is the same in an economy.   Look at the miracle that is Singapore. What an incredible story from swamp land to powerhouse financial and services nation.  I commend you to read former and founding Prime Minister Lee Kuan Yew’s book “How to Build a Nation or ‘From Third World to First.”

Back to South Korea.  Remember that not so many decades ago she was a recently war-torn, farming nation with dirt roads and very little protein in its citizens’ diet. Fast forward to today, and a Samsung Galaxy phone talks to the owners Hyundai car; and when I see a container ship out of my office window it’s bound to be loaded with South Korean containers, cars and they’re likely on a South Korean built ship.  The listed company KEPCO (Korean Electric Power Company), the “heart” following my metaphor above loses vast swathes of money year in and year out as it basically sells very cheap power to South Korean residents and businesses so they can build industries that do all those good value-add things for the economy as outlined by Professor Porter.  Little wonder then that South Korea is world-leading in some of the most energy intensive industries there is including semiconductors, ship building, automobiles and steel etc.

Now let’s think about New Zealand in this light and think about what infrastructure, businesses and other “organs” are needed here to really get this place to hum.   We need to get serious because if we don’t not only will our standard of living slide further, we won’t be able to afford decent education and health services and all the other things essential in a first-world nation.

A great quote from Calvin Coolidge, 30th US President: “Nothing in this world can take the place of persistence. Talent will not: nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not: the world is full of educated derelicts. Persistence and determination alone are omnipotent”.