Infrastructure and the solo entrepreneur

Saw this book title “What would you do if you knew you couldn’t fail?”. My instinctive response was “Nothing!  What would be the point?” I am not suggesting we should court failure, but we definitely shouldn’t be afraid of it.  Of course, we all want things to go ‘according to plan’. But when was the last time you actually learnt anything when it did?  Without the possibility of failure, can you really succeed?

‘Disruptive change’ is today’s mantra. Along with rapidly increasing technological change, the economy has also seen a large increase in the number of ‘solo entrepreneurs’.  This is not coincidence. The latter, no doubt, has a lot to do with downsizing in large companies, and by government, but it also reflects a greater willingness to assume risk, especially by the young. They interpret risk not as ‘a risk of failure’ but rather as ‘a risk of great success’.  And the world is benefitting by it.

However, can solo entrepreneurs, or at least small businesses, make a difference in infrastructure? Is this not a game in which only the mega-large or mega-rich can play?  For large scale production this is probably still true.  However for advice on policy, assessment of project proposals, improving decision or production flows, and many other aspects, small is definitely beautiful – it is nimble, can move quickly, is not bound by the need to protect past decisions.  And technology is now making large scale production (large, centralised, physical infrastructure) no longer the obvious ‘go-to’. So whether you are an organisation looking for an infrastructure solution or a solo entrepreneur in this space; small, customisable, and niche is the way things are going.

PS. If you are a solo entrepreneur in this space, you may enjoy a blog and podcast which I have recently discovered.  It is “Flying Solo” – everything you want to know about being a solo entrepreneur.  Its tag line is “work for yourself – not by yourself”.   I am enjoying it so have a look or a listen and tell me what you think.

 

 

Making Sense of What we Read

How did you go with Friday’s Puzzle to make sense of the statement:

“The transition to a lower emissions economy is underway and cannot be reversed. Ensuring that the transition is smooth will require major investments in assets with long life spans.”

In this statement I think that there are two correct statements, another that requires a certain value proposition to be acceptable, and one that definitely shouldn’t be accepted without considerable further argument and evidence.  Why? Here goes:

  1. The transition to a lower emissions economy is underway.  I would consider this undisputable as we have a lot of global evidence as well as experience from home.
  2. Cannot be reversed’?   Well, it is highly unlikely given our international commitments to lower emissions in the Paris Agreement.
  3. Ensuring that the transition is smooth’?  Now it starts to get tricky.   Here the writer assumes that intervention to ensure a smooth transition is something that we must do, something that is innately desirable.  But is it?   We don’t intervene in all market adjustments.  ‘Free-market’ advocates usually argue vociferously that we shouldn’t!  It’s desirability and nature in this case needs to be carefully argued, not assumed.
  4.  ’will require major investments in assets with long life spans’ .    Although presented as if this is an obvious conclusion from the preceding statements, it isn’t.  Closing down large (coal burning) plants does not imply they need replacement with other large plants (which Chapter 3 assumes). Demand is decreasing, production is becoming more efficient and our options are rapidly increasing. We need to examine them. The need for large, long-living, plants is no longer obvious.

Any of us can be guilty of stating something as a ‘fact’ when we should be recognising it as a ‘proposition’ to be argued, and the more passionately we believe in what we are doing, the more likely this is to be the case.  So if you catch me doing the same – which is entirely likely – please call me on it, in the comments section below.

And I would love to see other examples. If we get enough we can have a special puzzle page!

Do the best lies contain an element of truth?

It is true and, whether deliberately or not, many policy and political statements nowadays sometimes contain elements of supposition masquerading as fact.

As an undergraduate I was taught to parse statements for those elements that were factually true and those that were either incorrect or purely supposition.  It was one of my favourite exercises and I think it is time we brought it back into all curricula and into our daily thinking.

The following is an excellent example. It heads up Chapter 3 of The Preliminary Report of the Independent Review into the Future Security of the National Electricity Market | Department of the Environment and Energy, a chapter that deals with the transition to a lower emissions economy.

“The transition to a lower emissions economy is underway and cannot be reversed. Ensuring that the transition is smooth will require major investments in assets with long life spans.”

Innocuous?  Not so. This is a case where we have three statements that we can probably accept trying to force our acceptance of a fourth, that we really shouldn’t.

Try parsing it for yourself – and come back Tuesday for my take on this.

Have fun!

Infrastructure & Citizen Participation

Is it time?

It used to be the case that we elected people to govern us and then trusted them to get on with the job – while we got on with ours!  But the world is changing. For one thing, we are getting smarter!  According to the Flynn Effect, IQ scores are increasing by about 3% every decade.  We are also more educated and continue to learn.  In Australia, more graduate and more continue to study throughout life (especially women!). Access to digital technology also means that we can be more aware.

The upshot is that many are no longer prepared to let others make decisions for them.  They want to be more involved in decision making.  Sure,  smart phones can be used to report light outages and potholes, and individual data can be collected for community improvement. But is it enough?

According to the Economic Intelligence Unit in their report ‘Empowering Cities’. in a study of 12 cities around the world, the majority of citizens want to contribute to decision making – especially in healthcare, education, pollution reduction, environmental sustainability, and waste collection, treatment and recycling – but they don’t know how.

These are areas in which citizens – as users of the services – could have much to contribute. These are also areas in which infrastructure features heavily – and where, at the moment, the views of infrastructure providers prevail over the views of users.  Would greater citizen discussion of infrastructure issues lead to improved outcomes?

Talking Infrastructure believes so.  What do you think?

Infrastructure Sustainability – Can we get there from here?

We’ve all heard the joke of the traveller asking a local how to reach a certain town and being told ‘Well now, you can’t get there from here’. We laugh, but when it comes to infrastructure sustainability, our starting point also determines where we can arrive.

At a time when I was an advisor to the Minister of Construction, a new dam was proposed.  I looked into the proposal.  It did not permit extension of the growing area, nor, because of the weather conditions, did it permit extension of the growing time. At best it would provide a fall back for famers in case of drought.  However the benefits of that for the few farmers involved came nowhere close to covering the costs involved. No matter which way I looked at it, on economic, social or environmental grounds I could not make it stack up. What really puzzled me was that the major advocate for the dam was no idiot. He was, in fact, a Rhodes Scholar. I said it was a money losing proposition – and he agreed with me!

“Then why on earth do it?” I exploded in frustration.

“Well”, he said, “the money’s going to be spent on something, so it might as well be here!”

Today we tend to start from the assumption that we have to build something which we can see by the fact that governments determine their capital budgets separately from their recurrent budgets. And we often hear anxiety around the notion that ‘we have to keep up the pipeline of construction projects’.

Why?   Why is it important to keep UP the capital spend, but keep DOWN the recurrent spend?  Is it even possible?

If we want sustainability, maybe we need to look at where we are starting from.

 

Employment Generation

We assume that ‘big’ events and ‘big’ infrastructure create jobs.  But is this true?

In the last post I said the 1985 Grand Prix was ‘only slightly better’ – at creating income and jobs – than the ‘next best thing’ the State could have done with its money.  What was that ‘next best thing’?   Surprising as it might seem – Creating more public service jobs!    Creating jobs directly by increasing the supply of doctors, nurses, teachers, maintenance personnel and assistants of all kinds, does two things. It directly increases the services received by the community thus improving lifestyles. And it creates lasting jobs, ‘bankable’ jobs, that increase economic stability and well-being the way temporary jobs, such as those from construction, never can.

Why not stop talking ‘jobs’ in general and talk ‘good jobs’ – permanent and sufficient to support a family, as the minimum wage was always intended to do. Or better still, let us think of the outcomes that we want, and how we can get them.

 

Sports and job creation

When the first Grand Prix was held in Adelaide in 1985, government officials touted how beneficial it would be. However, they were not able to produce a shred of evidence to support their enthusiasm.  So the Economics Society of South Australia, jointly with economists from Flinders and Adelaide Universities and the Tourism Department, examined that first Adelaide event. It was the first and most complete economic analysis of any special event and was cited in every study on the subject for over twenty years. What did it find? In terms of employment and income generation the Grand Prix was only marginally better than the next best thing and then only because the Federal Government gave the State a grant!  The more enthusiastic the announcement – the more it pays to check!

The same goes for the enthusiastic job promises for new infrastructure proposals. Ask yourself how valid they are – and how they have been derived.

Reference: The Adelaide Grand Prix, 1985, published by the South Australian Centre for Economic Studies.

An Infrastructure Consensus.

Infrastructure – ‘if there is a consensus right now in American politics’, says the Economist, ‘it must be that infrastructure spending is a good thing. It employs workers, improves economic efficiency and, at the moment, can be financed at rock-bottom bond yields. So why don’t governments get on with it’  The same could be said of Australia. But just because many people believe it doesn’t make it true. (We used to believe the world was flat!) For example, how exactly does spending $1.6 billion on NSW Sports Stadiums improve economic efficiency? How does it plug the so-called ‘black hole’ of infrastructure expenditure that will stop the NSW economy going backwards? How many jobs are created?  How long will they last? .  It is about time we started asking these questions and more – demanding answers! Yes, us!

Infrastructure – what and why?

The ‘group for building stuff’  (post 20 Jan) focussed on construction.  The reserve bank idea focusses on financing. Both of these miss the point – by your traditional country mile.  What is the point?  Probably best explained in the title of Brett Frischmann’s book “Infrastructure – the social value of shared resources” The whole point of infrastructure is not so much what IT does as what it enables US to do!  That’s the social bit.  The ‘shared resources’ refers to the fact that, unlike our iPhone or car, infrastructure is not owned by any one of us alone, but by all of us together. Thus we need a representative group decision.

So rather than give the job to some group that can only do a partial – and therefore poor – job, how do we improve government decision-making?

NSW – new premier, new infrastructure direction

“Infrastructure projects means local schools and local communities; it’s not just about the mega-projects in Sydney.  Infrastructure is about upgrades to hospitals, upgrades to school halls, sporting facilities.”

Gladys Berejiklian, who is set to be voted by the Liberal Party room as the state’s new premier today (Monday), speaking to The Saturday Telegraph, 20 Jan.

I can’t help taking a two way bet on this.  On the one hand, it is definitely refreshing to see State Governments move off the mega projects.  But as school halls were a focus of the last big infrastructure spend during the economic stimulus (Building the Education Revolution), it is strange that it should still top the list of local infrastructure needs. Has this list been seriously thought through or quickly cobbled together?

Your view –  populism or good decision-making?