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End of Year News from the Barefoot Economist

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Dear Valued Readers,

It has been a while since I’ve written, mostly because I have become busier working on business ideas so I haven’t had the time to blog as much as I used to. I have missed having the opportunity to research economic issues that interest me and you, my readers. But it has been good that something is keeping me off the streets besides blogging. Just in case you’re wondering, no, I haven’t become a genuine barefoot economist, I can still afford to live and eat in relative comfort.

So what have I been doing with my time? I’ve joined two partnerships. One is a drycleaner and the other is a consultancy/investment company partnership. I’ve also been working to setup a financial co-operative to invest and assist social enterprises and other co-ops. I’ve also help planned and gone on a soccer tour to China. In between all that, I managed a side trip to the Sunraysia fruit fly exclusion zone to take my wife to see what a desert looks like.

Read on, if you must find out more about what I’ve been doing.

Drycleaning

Yes, that’s right, I’m a drycleaner! Actually, that is totally wrong. I actually haven’t drycleaned a single clothing item yet. I have been asked to join the partnership by a good friend of mine who is a drycleaner. He asked me to write a business plan. Then he saw how mad my business planning was and asked me to join his partnership. Why do they need an economist, you may ask? I guess I came cheap and was prepared to take a risk on a new business model. For those of you who know anything about startups, the most similar one to our company is Washio, the ‘Uber-for-laundry’. Yeah, that is how bad-ass my business planning skills are, we’re going to do online stuff and we’re going to use the ‘internet’ and ‘smartphones’ and ‘agile thinking’ and shit. I’m down with Malcolm Turnbull and his crew (except the climate change denialist and Muslim-hating part of the Liberal Party).

Consultancy/Investment Management

The other partnership is a bit more business-y. Essentially, it is about helping businesses take advantage of the growing and deepening economic relationship between China and Australia. We have been looking at setting up a building materials distribution, investing in milk powder plants, set up an online education partnership and develop links between European, Australian and Chinese designers. When you’ve studied economics, you tend to ignore the crucial part of people to people interaction in establishing and growing a business relationship. Not all business deals get done on the basis of price. I also got to see how some very rich Chinese people run their businesses. Let’s just say, what worked in China got lost in translation in their businesses in Australia.

Finance Co-op

People really like asking me to be their partner. These guys have taken it to another level and asked me to join a co-op. Anyway, this co-op aims to help other social enterprises or co-ops to become financially sustainable by developing a business model that can fund their operations and does not conflict with their mission. We also want to help develop business models that can attract financing from mainstream funders such as banks and savvy investors rather than being reliant on philanthropic or government funds. How are we going to be financially sustainable? We aim to take a different tack from other consultants in this area and become partners where we both benefit from its business success and ability to attract investment. Essentially, we become investors through our ‘sweat equity’ which means we have to defer our gratification until the social enterprise or co-op becomes profitable.

China Soccer Tour

I actually don’t play soccer. In fact, before I went on this tour I thought soccer was played by long-haired mummy boys who would start to cry if you swore at them to win a free kick. Just an example of a game that had in-built perverse incentives, I thought. That changed when I was forced to play because some of our players were unable to get on the park because they were suffering injuries like ‘drinking too much at karaoke’ or ‘getting tired from running too much’. So I had to step in and I promptly learned how fit you need to be. We actually played against Chinese police teams. Because our team was younger than the Victorian police team we travelled with, we often played the fitter and faster younger team. Which was great if you like being out of breath. But I managed to put my years of watching AFL to good use by subtly blocking and jumper punching the star striker or midfielder to slow them down. Fortunately, I didn’t play in Beijing where a crowd in their hundreds of police cadets turned up and we played to the disturbing sound of live gunfire in the background. If the crowd saw me clock the striker I think I’ll be telling another story about Chinese jails. So yeah, I’m an international soccer player now.

We were also in China when smog reached an all time worst. We got to experience world-class smog, the kind where you can’t see 200 metres ahead of you – in the middle of the day. For two weeks we didn’t see blue sky or sun. I think this gave us a new appreciation to us that we live in a country with clean air and clear skies.

Deserts and Fruit Flies

My wife thought it would be a great idea if we drove up to Mildura, in the middle of the Sunraysia fruit fly exclusion zone, because she had never seen the desert before. She is from South East Asia where an environmental problem is too much green growth rather than too little. We decided to go to Mildura because we wanted to relive the experience when we were living in Boston where we just got into a car and drove to Maine to take in the scenery and eat lobster rolls and blueberry pies. Except, I downplayed the food aspect because I’ve never had a good meal outside the major cities or the wine regions of Australia. Anyway, we saw deserts which was just as barren as you would imagine but we also saw lots of kangaroos and emus. Which was kind of scary when you don’t have a piece of glass or a fence between you and them. Fortunately, they felt the same because when we would see one of these creatures they were running or jumping at breakneck speeds in the opposite direction. Good thing they’re not aggressive, I can’t imagine how we would escape a horde of angry emus.

What about the food? We ate a lot of emus. Nah, only joking. Well, the Sunraysia region is a fruit-growing region. The main export crop are oranges and other citrus. I can see why, they were SENSATIONAL. I bought 10kg of oranges but I wished I bought more. The only thing is, you have to buy it when you leave because you can’t take fruit back in on the pain of death (may be an exaggeration). Anyway, if you’re in Mildura, do it, eat the oranges. You’ll thank me later.

Some Irrelevant Comments on News that Matters

During this time we had yet another political coup in Australia. I think most Australians expect it. No, the generals didn’t order the tanks in and declared martial law. An investment banker from Sydney (Malcolm Turnbull) challenged and beat the sitting Prime Minister, Tony Abbott (or the ‘Mad Monk’ as some on the left call him). Then he started to introduce some crazy ideas like he wanted his government to be ’21st Century Government’ and that ‘innovation’ is critical for growth. Crazy stuff. He recently presented his ‘National Innovation and Science Agenda‘. It sounds good, but I’m sceptical that as long as Australian big business are protected from serious competition, I think they will have little incentive to innovate. In fact, they are the largest beneficiaries from R&D tax breaks but have done little innovation of note.

Another interesting thing happen, apparently there was a breakthrough in climate change negotiations in Paris. Apparently, nearly 200 countries agreed to carbon emissions limit. The main accountability mechanism is regular reviews. The more interesting story is how the news stimulated a big shift on commodities and stock markets. The price of oil has fallen on the news and miners in Australia were pummelled. It was interesting to hear the Minerals Council of Australia saying that the Paris agreement was good for Australian coal. So, it appears there was something for everyone in the Paris agreement. But, as I was saying, investors’ confidence in renewable energy has improved which could be the key to reducing emissions, not more talks. Why do I say this? Well there is a precedent with the Montreal Protocol on chloroflurocarbons (CFCs). One of the reasons it was successful in limiting these ozone-depleting chemicals because cost-effective technology had been developed to replace CFCs. This was done by providing companies with the long-term certainty that CFCs would be phased out so they needed to find a substitute. The Paris agreement is a step in the right direction. As long as subsequent agreements are followed up that stimulates investment in low carbon technologies, it may not matter what emission limits governments agree to because the market may have overshot it. Maybe that is a big if but it seems more feasible than a legally-enforceable treaty or a ban on coal.

…a Final Thing

I’ll try and get back into blogging on a more consistent basis in 2016. Probably not every week, but I’ll aim for every month. Thanks for reading and have a great break!