Photograph by Kathleen Collins

TODAY, Lech Walesa runs the Lech Walesa Institute, founded in 1995, whose mission is to support democracy and local governments in Poland and throughout the world. The institute is committed to solidarity with pro-democracy movements worldwide. Walesa recently led a delegation to assist with transition of power following the revolution in Tunisia. He plans to visit New Zealand for the first time within the next 12 months.

Walesa’s current offices on the top floor of Gdansk’s historic Green Gate residence are far removed from the docks where he rose to fame. But his commitment to peaceful democratic change is as strong as ever.

He met with IN-Business publisher Tim Collins in Gdansk, Poland, to discuss globalisation, China and New Zealand vodka.

“WE SHOOK GOD ALMIGHTY.
We are not afraid of our neighbours any more. We had to rearrange life and so it happened . Sometimes I’m afraid I awoke the demons, the demons of freedom. Where is the responsibility? So, it’s a huge chance and we have many things to discuss, but also there are threats.

WE STARTED AS THE FIGHT FOR FREEDOM,
with workers against the system, and suddenly it’s turned out that we have the whole of Europe, and now we have the whole world. It is a global world. So here are new programmes, new democracies.

If somebody told me that I would live to see such changes in Poland, I wouldn’t believe it. But now when I think how after all those years, how much better things could have been done, I am not satisfied.

I CHOSE ANOTHER WAY, NOT LIKE LENIN OR CASTRO.
The problem is whether I won or lost. Many say I lost. I’m saying I won. New processes started. Because the revolution was not for me; the revolution was for democracy, freedom.

My fight and the fight of Poland opened the subject of globalisation. I would like to focus on building the programme and structures of globalisation. Everybody sees that. There are a lot of ideas – and everybody sees that in a different way.

The present programmes, political and economical, do not fit globalisation. We have been competing within the countries – continents even – and globalisation does not allow that anymore. It’s a different philosophy.

We have to take a system for globalisation from the “law of the road”. Anybody – the Arab, the black, the white, whoever, can drive on the road, and it is okay. We would like to make such regulations for other subjects and other ways of living so that we can drive like that. Economics, politics, science, healthcare . . .

NOT TOO FAR HOWEVER.
I will never agree that my wife will be globalised! So there are some subjects that we don’t want globalised. That is why we have to choose, definitely, those things that everyone will agree. Everybody has different values… so there is a lot to talk about, to speak about, and to quarrel about too, and this generation will have to do it. I am discussing this during my visits to every continent.

I KNOW NEW ZEALAND ONLY FROM THE MAP.
I would like to see it by being there. Maybe I will find something important which will be good for my fight.

I have been invited as a revolutionary to help transition power in Tunisia, to share my point of view. I have been talking about how technology will focus people on the changes, and force people to change their point of view and way of living. I have spoken to the elites of the nations to get prepared so that there will be no fighting, no shooting, and no aiming at one another – so that the solutions will be less painful. When I go there I will see how possible it is.

I AM TRYING TO HELP CUBA BECAUSE IT IS A WONDERFUL COUNTRY.
We are trying to change so much in Cuba, as much as possible, so that other people can go and cherish what Cuba has to give. It is very dangerous there and too near the United States. Those who are most active are emigrating and therefore they are weakening the fight.

Sooner or later Cuba is going to be free, finally, because mankind is focusing on Cuba. And there are huge businesses that can be done there. At the same time those businesses are giving a lot of health for the people.

WE ARE ALSO TRYING TO FOCUS ON WHAT IS HAPPENING IN CHINA –
but from the other perspective. As I said before, the world has to become globalised and there is no globalisation without China. They have a different way, different road to the future, different structures.

I am for globalisation but I don’t like the Chinese solutions. It should be that all of Europe, together with the United States, should press on China to change. If not, China will press on us. This is the choice we have.

I have connections with revolutionaries in China but have to be very careful because I know what pressures they are under. I don’t want to endanger them. They cannot change so fast in China. Because it is like I always give the example of Poland and the road system – we can drive 200 kilometres per hour. China, on the other hand, is like a huge truck so he can’t do 200 km per hour because there would be accidents. Maybe we should speed that truck up more but maybe not too much… I like them very much, their culture is splendid, and I am thinking of them the best I can but it has to be done slowly.

THE PROBLEM IS THAT WE DON’T SPEAK SERIOUSLY ABOUT GLOBALISATION.
My suggestion is that within the United Nations there could be a very small office established with a small sign: ‘Here we are seeking ideas for globalisation’. Three rooms: in one room, we seek the global parliament; the second room, we seek global ruling; and the third – defence, global defence against terrorism for example. And a few people – not many – should sit, think, and propose.

[PRESENTED WITH A BOTTLE OF 42 BELOW VODKA AS A GIFT FROM NEW ZEALAND] DO YOU THINK THAT IT WILL HELP THINKING?
If it will be good, and I will like it, I will tell you when I come to New Zealand.”

Illustration by Rebecca Walthall

MY experience of working with Russia has been that it is most easily consigned to the “too hard basket”. To make trade with Russia work we have to look ahead and be bold and strategic in our thinking: not qualities which have necessarily distinguished New Zealand over the past few years of bureaucratic socialism.

If we look at the Russian version of “Russia”, “Rossiya”, the first two letters sum it all up: “Risk” comes before “Opportunity”. See through and manage risk and you have unique opportunity. I work around the idea of “OURS for the taking”: Opportunity, Understanding, Relationships, and Step-by-Step.

The starting point with Russia is: what is the opportunity, what’s in it for us? Can we use Russia to help us achieve our national goals as “New Zealand Incorporated”?

Business is not a one-way street. Why on earth would big bear Russia want to work with little kiwi New Zealand? Isn’t this just a recipe for kiwi-feathers-in-bear’s-mouth stuff? To interest Russia, we have to envisage some sort of partnership, at every level of business, to show that both of us can benefit from paying some time and attention to the other.

My view is that yes, Russia can help New Zealand – in major ways. First, it can help us become an agricultural player in the northern hemisphere and overcome the tyranny of distance which has plagued us for 130 years. Russia, compared to New Zealand, has land in abundance. Animal farming can be revived based on pasture and no subsidisation.

What’s in it for Russia? The world needs Russia to become a major food exporter. Products from its animal farming could feed Russia’s impoverished rural regions, increase national security and make a major contribution to global food supplies.

As the Russians and their economy catch up with the world, Russia will become a value-added market for New Zealand – wine, food, clothing, wool, interior design, container- and cargo- handling equipment, abattoirs, meat plants, jet boat engines, luxury yachts, engineering goods and services, IT solutions, medical technologies, education services, tourism – the list goes on. The Moscow-St Petersburg corridor has a population bigger than Australia’s. Its consumers are sophisticated, ambitious, aspirational and have greater disposable incomes than most New Zealanders and Aussies. There are niche opportunities for New Zealand pretty well everywhere I look.

We just don’t seem to get how much Russia has advanced in so short a space of time. Not only is the average middle-class Russian wealthier than we give them credit for, they are not shackled by mortgage debt, by and large. The people with money to spend in Russia today are the young rather than the old. Get consumers used to New Zealand products, goods and services today – and you can build a lifetime of loyalty to Brand New Zealand.

Why are we missing out? We were starting to show some “get up and go” with the New Zealand Dairy Board and entrepreneurial business activities in Russia in the 1990s, at a time of stress and change. Then we corporatised our thinking, put on suits and mental straitjackets and ran away. It’s a market going begging. It’s great to find our meat and seafood on sale in Moscow but not so great to find that it’s Aussies selling them because we haven’t bothered to, our view of Moscow being dull grey  with lines of poor people queuing up for cabbage.

What we lack at the moment are insight and ambition and, perhaps most of all, the means of connecting small, clever but underfunded and risk-averse New Zealand companies with their Russian smallish (by Russian standards) clever, underfunded, but ambitious and rapidly growing counterparts.

The human factor cannot be ignored. Russia has ambitious people, brilliant minds and original thinking (as well as gorgeous women). Russians are extraordinary reverse engineers. If we in New Zealand are serious about adding value within its economy, then science and technology-based connections with Russia could prove invaluable.

Equally, New Zealand, with our open economy and attitudes and network of links with the Asia-Pacific region, can help Russia enter the Asia-Pacific mainstream as a true Asia-Pacific power.

In many areas of social activity – sport, the arts, culture – we can learn from Russia and also contribute, in some way, to Russia. We have no need to be bashful about our contribution. After all, our Ernest Rutherford launched the global nuclear age, changing the prospects of humankind forever and incidentally helped the USSR become a twin super power. In return, we got ballet and the pavlova, helping make us cute and soft-centred as a country.

Remembering OURS, understanding comes before relationships. A little fellow-feeling and humility on our part will not go amiss.

The good thing is that if you think about how successful business relationships are built in New Zealand, you have some of the keys to what is required to working successfully in Russia.

So, just as you need to be clear about what you are looking for as a business and do your homework on Russia, you need to be prepared to invest the necessary time and effort to find Russians with whom you can work and build up links which bring fair benefit to you and them. Russians have their genetic equivalent of ground-penetrating radar – they can work out quicker than you can believe just who you are and what is behind your façade. They work with head and heart. They will do business because they like you, and will have a vested interest in success once they decide to go with you.

You do have to be fair, and determined, patient and persistent, of course, and trust is essential. Break that trust and you will rapidly find yourself in a “win-lose” or “lose-lose” game, and you will be the loser.

This is pretty well the exact advice I would give to Russians wanting to work with New Zealand. There is a surprising similarity about the way business works in both our countries: ratbags and snake oil merchants are found in both places, as are people of the highest professional standardsand integrity. Discovering who is who is a commonplace challenge. Somebody who can act as a bridge or referee or personal  guarantor can be helpful in a match-makingsense.

Finally, you need to take a step- by-step approach. Start slowly. A small deal is a test for both sides – if you cannot honour every detail of a small deal, how can you be trusted with a big deal?

The human element is a major potential advantage for us as New Zealanders. Don’t underestimate the quality of personal experience we can offer to a Russian partner in New Zealand – such as down-to- earth decency, genuine and warm personal relations. Recreational activities such as trout fishing can cement a business relationship.

It works the other way too. Once you get to know Russians, they can offer you experiences in their own country about which you can only dream.

Parallel development

THERE are as many myths about Russia as there are about New Zealand. Only, the New Zealand myths tend to be bright, warm, cuddly and friendly, while the Russian myths are dark, cold, scary and unfriendly. Literally and figuratively we are polar opposites. But there are broad similarities.

Our recent histories move in parallel: New Zealand’s “crash-bang” Chicago-style revolution produced wonderful examples of privatisation and not-so-wonderful examples. Russia’s revolution produced the collapse of the USSR in 1991 and “smash-and-grab” capitalism, followed by wholesale pillage of state assets.

We are susceptible to foreign ideologies: we both had revolutions at more or less the same time: New Zealand in 1984–85, Russia in 1985.

In both countries public assets suddenly transferred to the ownership of wide-boys who proved adept atprivatising profits and socialising losses.

Both of us came to love public servants: the more liberal both our economies became, the greater the number of public servants and the role of the state.

Both our empires fought back in the sense that public servants came to rule the roost, increasing the burden on taxpayers and business. In Russia we refer to this as “blatant corruption”. In New Zealand we refer to it as “increased transaction costs”.

Both countries have remained overly dependent on the export of commodities. Value-adding jobs and products are thin on the ground. Investment capital comes knocking at neither door (unless we really tart ourselves up), and oursiren calls to capital are rather thin and reedy.

It is SMEs which will be the saviour of each economy but only if they can be nurtured, supported and encouraged to grow.

In both countries today there is evidence that governments are taking a leadership role again. Of course, the Russians get the bad press. The Kremlin’s reassertion of central authority is taken as a return to the Soviet past. The same is true for New Zealand. The idea of active government is a shock and a novelty – but it is now the new reality, for the next generation at least.

Both Russia and New Zealand are young countries, and it is brilliant young people who will be taking charge in this next generation.

IGNORING the lives-costing foreign wars New Zealand has opted to participate in, notably the First and Second World Wars (only the latter being justified), our 170 years of nationhood have by world standards been an awfully easy ride. Only the 1930s depression was momentous and left its scars for decades to come, far more so than the late 19th century recession.

Of course there have been occasional loss-of-life events; the civil war of the 1860s between the settlers and some Maori tribes, the Napier earthquake 80 years ago, then Tangiwai in 1953 and Erebus 30 years back. Spread over 170 years these are a mere flea-bite when compared with most other nations’ misfortunes.

As far as we New Zealanders were concerned, like traffic accidents, bad things happened to other people. We might be boring but at least we are safe. Well, no longer.

Now it would seem we’ve endured a massive misery catch-up and the last three years have been a continuing horror story.

First came the recession, inflicted on us (and the rest of the world) by shocking banker negligence. Then followed the loss of billions of dollars of mainly old folks’ savings in the finance companies debacle, meaningful in our small population. And last year came the full realisation of the leaky homes crisis with estimates up to $25 billion in costs, a huge amount in the New Zealand context.

But looking back it now seems that all of that was a mere warm-up for what was to come. The Pike River disaster traumatised the nation and then came Christchurch.

Where to start? Our second city lies in ruins. Was it not for the city’s circa 70 per cent home ownership, doubtless all of its inhabitants would by now have fled to Auckland and Australia.

For that private ownership reason the houses will be fixed or rebuilt, but what of the CBD, a lovely city now destroyed? Thanks to massive suburban malls the CBD was already in big trouble with numerous empty shops and too many old buildings, rightly dismissed by Gerry Brownlee as old dungers. But such is the destruction, no sensible owner will want to rebuild as tenanting will be an impossibility. Many owners will take their insurance money, pay off any mortgage and write off the land, an ominous prospect for the council’s rating revenues. Add to all of that the continuing traumatic after-shocks and the outlook looks grim.

So is all lost? Well actually no.

First let’s get some perspective. If New Zealand was a person the situation is analogous to being in an accident and lying in hospital with a broken leg and a bad concussion. Time will heal both. Our extensive, highly developed agriculture industry and our indus- trial and service activities remain unaffected. We will come through all of this.

Harvard professor Edward Glaeser, in his acclaimed recent book Triumph Of The City, made the point that great things happen in the evolvement of great cities when there are authoritarian governments. Democracy impedes rapid or major progress which is the unfortunate consequence of people-power with all of its necessary checks and balances and competing interests. That’s all quite logical and is arguably the biggest problem facing the rebuilding of Christchurch, as so many major decisions will be made by committees and we all know the unhappy consequences of that.

Nevertheless, consider Europe and Japan lying in ruins in 1945 and look at them now. Consider also Beirut which a decade back lay devastated following a prolonged civil war. Look at it today.

As the Economist pointed out a year or so back, Lebanon is the only nation other than the Abu Dhabi-type special cases which missed the recession. And why? Because of its booming tourist industry. Lebanon is a lovely country with much to offer tourists but the fabulous Roman ruins of Baalbek aside, it’s the splendid new rebuilt city centre which pulls them in.

Today Beirut’s CBD foreshadows the future for all cities with its wide pedestrianised avenues and plazas, fountains and other features, something incidentally that mayor Bob Parker had envisaged a couple of years back for Christchurch.

How did Lebanon pay for this wonderful outcome? It took a visionary, the subsequent president, who mindful of the Lebanese world-wide diaspora, called on them to support a massive rebuilding exercise through a multi-billion dollar fund structured as a shareholding commercial venture.

We do not have an authoritarian system although we certainly have the diaspora, so such an exercise would be difficult although not impossible with a visionary government. But our democratic political processes are not amendable to vision.

Perhaps an even better example is Hiroshima which was totally destroyed by the bomb in 1945. But old Hiroshima was a terrible place, essentially medieval in design and, as such, an anachronism. With a blank canvas, a lovely new modern city has been built to replace it.

I think the solution lies with Bob Parker’s original vision, namely to largely pedestrianise the CBD, starting from the centre, and bring back bicycles for which, up to 50 years ago, the city was famous. In other words, emulate the rip-roaring success of Amsterdam which is essentially a low-rise pedestrianised cycling city and one of the world’s tourism hot spots.

But for bicycles to work the government needs to scrap our infantile helmet law, at least in no-motorised-traffic CBDs. The new Christchurch could be a massive improvement on what was there before which is always the case elsewhere in such devastation circumstances.

One final but salient point. About 20 years ago I bought in Wales a complete set of The Times newspapers up to about 1980. Opening them at random over 150 years proved revealing. There was a consistent theme on the British economy, namely that the game is now up and all is lost. Yet despite that continuing despair those 150 years have marked the most progressive era in human history.

So all is indeed not lost for Christchurch. Far from it in fact. It now has the opportunity to build what could be our finest city, unblemished by redundant, unused, unwanted and unloved buildings, despite the bleatings from bearded bastards wanting to list everything.

As Christchurch’s most famous architect, Sir Miles Warren, despairingly complained to me once about the listing excesses, if people loved these buildings as much as the bearded dullards profess then why are they not asking us to design new buildings like them?

Postscript: Peace punch

Talking of Hiroshima brings to mind a cheery tale to amuse readers in these glum times. As Mike Moore is fond of pointing out, I’m the only bugger in history who could manage to get into a fist-fight in the Hiroshima Peace Museum. Here’s what happened.

I was standing in there studying the large relief model of the pre-1945 city under glass when a Japanese woman loomed up beside me and began discussing it with me.

Then suddenly I was pushed violently from behind. I turned around to find a crowd of TV cameras and photographers and then one of them tried to shove me away.

I pushed him back, he swung a punch and I dropped him with the old faithful left hook. All hell broke out.

It transpired the woman talking to me who was the reason for this media scrum was Yoko Ono.

IT is now folklore that “big is good”. But what about “faster is better”? Let’s admit that most of us like speed, even though we know that in some contexts it could be counter-productive. Of course, in the worst case scenario we all (should) know that “speed kills”. But, away from the steering wheel, most of us still compete in the race to be the fastest. After all, not many of us like coming second. I know, because I’ve been a Hurricanes supporter for 16 long, long years (more on that another time).

So, what about in the world of economics and business? Is the quest for speed a plus for business and national economic prosperity, or does it get in the way? The answer, I suggest, depends on what we expect to gain from more and more speed.

The benefits of doing things faster can be around delivering early; being a first-mover with new technology or into a new market. This capability and capacity to better meet the needs of clients and customers should presumably provide benefits in improved profitability, and ultimately a more sustainable business.

But, arguably, the “need for speed” in many organisations may well be a metaphor for larger and faster profits. End of story.

This is where I part company with that quest for speed. For not only is there a push to do things faster, it seems this is translated in many quarters to mean that we need to gain from what we do even more quickly. If we don’t get gains quickly, then we are not interested. And it is this aspect where, in my mind, an unrestrained quest for speed can hinder the development of national economic prosperity.

Yes, it may be appropriate for (some) individual businesses to press for speedier processes to translate into larger and faster profits. But from a national perspective there is a clear need to encourage a more informed balance between safeguarding (and indeed improving) longer-term gains, and the appetite for the fast buck. To justify this call for balance, I reach for my economics textbook and bring to the fore a concept dear to my heart. It is called market failure.

I am a devoted disciple of the market mechanism in its ability to organise and trade-off (balance) an economy’s competing wants and needs. However, I am also fully aware of where the market fails to succeed in these balancing acts. And the one core failure in the prescribed textbook is its discounting of future generations’ wants and needs.

These can be devalued long before they even get a say through the workings of today’s market mechanism. There is a clear role, I argue, for an organisation to rectify this market failure by representing the wants and needs of future generations.

This role clearly falls to our elected leaders. Admittedly, this is contentious. Some believe in the here and now and feel little responsibility to future generations. But others do. I do not argue that the former view is any more or less (economically) valid than the latter. But I do argue that those with the latter view do not have a voice in the textbook marketplace.And speed, where it is a metaphor for quick returns, amplifies this market failure.

Let me illustrate by way of an example. A local authority is about to spend a few million dollars upgrading its waste-water treatment and disposal facility. The benefits or gains in terms of the improved quality and amenity value of the nearby river will not be significant for a decade or more.

Such improvements could see a re-vitalised business and community centre as the area becomes increasingly attractive to new, well-heeled and highly skilled entrepreneurs, workers, and families. But again, these benefits are at least a decade away.

A conventional benefit-cost analysis would immediately discount these future benefits to a shadow of their actual value. At the promulgated Treasury discount rate of 8 per cent per annum, benefits that are a decade away are counted in the calculation at only 46 per cent of their value. If the benefits were a whole generation away (say 20 years) then the benefits would be counted at only 21 per cent of their value.

Competing options for such spending (eg. a few million dollars on upgrading a central city’s retail and car parking complex) may provide a similar quantum of benefits. But as these benefits will appear far faster, say next year, they would be counted in the calculation at 92 per cent of their value. Clearly, the wants and needs of future generations don’t stand a chance in the face of such competition.

The market is not great at weighing the balances between inter-generational spending and benefits. This is why leaders and institutions need to tweak market mechanisms accordingly.

It is important that the need for speed is appropriately limited so those that could be harmed are not rendered totally silent in their absence. Speed should be limited so that immediate needs are balanced by insightful leadership that is committed to building a prosperous economy for tomorrow’s Kiwis, as well as today’s.

WHEN buying a house or a second-hand car, there comes a moment after you’ve crawled under to check the piles or taken it for a test-drive, when you reveal your price.

Likewise, for anyone who’s ever had to sell goods or services to keep food on the table, the moment of price discovery is at the heart of the business.

You may have had coffee or lunch together, batted ideas back and forth, taken flights and invested time in presentations and brain-storming. If there’s real opportunity, there will probably have been lots of warm smiles and hand-waving about all that you’ll do together to conquer your mutual special corners of the world.

Only with great care, however, is a number ever placed on the table.

If we were in a Western, this would be the shoot-out.

And the reason for that, most of the time, is that when it comes to price-setting, there was never a right answer to start with. The answer is the answer, and your business lives or dies by the outcome.

Professionals who negotiate prices daily may disagree, and they’d be right to say you’ll never sell matches for a million dollars each. But if it’s a question of whether matches might sell at $1.50 instead of 20 cents a box, the rules of engagement are far less clear than an economist would have you believe.

In fact, a wave of research by behavioural psychologists in the last three decades has established that we are far less logical about prices than we realise.

This is the secret of pricing as revealed in a marvellous book, Priceless by William Poundstone, that boils down to the following sales tenet: whoever sets the first price has the greatest influence on the final price.

In explaining this, Poundstone shows how the relatively youthful science of psychology has informed the somewhat more elderly science of economics on the question of pricing in the last 30 years.

Previously known for their plodding application of rational markets theory to human behaviour, economists were forced to take notice when behavioural psychologists started to prove, in controlled experiments using modern computing power, that human biases exist in attitudes to pricing, often linked to values-based judgements rather than perceptions of monetary worth. Amongst the widest findings: a sense of fairness is crucial, but the definition of fairness is defined by naked self-interest.

From these findings came greater concentration on branding, offer-testing, and the rise of metricated sales channels and reward structures. This was long before the growth of the internet as a sales and marketing tool.

At the same time, some of the same behavioural psychologists were influencing theories of human reaction to risks – perceived and real. They found non-rational human nature had a lot to teach the scientists and rational policy-makers who saw risks as maths equations rather than personal threats of often unknown and perhaps catastrophic proportions.

This in turn sparked the public relations industry’s interest in the public phenomenon of “trust”, the thing which, if lost, makes people stop buying your product for a long time, and which no accountant can reliably value in dollars until the loss occurs.

INEVITABLY, from these insights, there also came some fantastically simple guidance for the advertising industry about how to pitch things to make sure not only that they sold, but with higher margins than a simpler approach might produce.

Take restaurant menus, a place where price-setting is an acute business issue. Every restaurant is different, and must find its place in the market. There is no Warehouse-style monolithic pricing here, unless you’re McDonalds. Even then you’re offering clever combos of short-term specials to raise sales and margins past normal levels.

A typical Priceless example is a US restaurant whose whole pitch was that it served a $72 steak, and if you could eat the whole thing, they’d wipe your bill. They didn’t expect to cash out many $72 steaks, but created an atmosphere for the diner where $72 was an extravagant gamble, perhaps $60 was okay for a meal – and there was some damn fine eating there too, my friend, of which they sold a lot at high margins.

The $72 steak became the “anchor” price for the rest of the menu.

Priceless devotes a whole chapter to the theory of menu layout, dividing dishes into “stars”, “puzzles”, “plough-horses” and “dogs”. A star is high-profit and popular, while a puzzle is high-profit but unpopular. A plough-horse is popular but unprofitable, and a dog is neither profitable nor popular.

“Consultants try to turn puzzles into stars, nudge customers away from plough-horses, and convince everyone that the prices on the menu are more reasonable than they look,” Poundstone writes.

A key finding: don’t list prices in a straight line down the edge of the page. That encourages price comparison. Make customers consider the food, and be upsold by the layout, not look first at the price.

What emerges is simply this: whoever names the price, sets the price. Not absolutely, but relatively, and in business everything’s relative.

Of course, you won’t stay in business if you take prices that don’t let you pay yourself or your staff. But from there, it’s a bit of a mystical tour, informed by the pricing of competitors, the state of the economy, the level of need or commitment from the buyer, and a myriad of other factors that make “the price” the price.

But the anchor is the first price, and it sets the tone. It’s worth remembering.

PARLIAMENT is currently considering a reform of this country’s suppression laws – and not before time. An extensive review of the court system embodied in the Criminal Procedure (Reform and Modernisation) Bill includes raising the bar on defence arguments for suppression of names and evidence.

“Extreme hardship” and “real risk of prejudice” will become the tests for suppression, rather than current oft-used excuses such as that granny is sick and could not cope with the shock of family fallout.

In future, white collar criminals may have to think twice about public humiliation before putting their hand in the till and investors might just be better protected from shysters.

The Media Freedom Committee – administered by the New Zealand Newspaper Publishers’ Association and representing all mainstream media including print, radio and television – is among those trying to ensure the justice system becomes more open.

Its submission to the Justice and Electoral Select Committee argued suppression orders are far too readily applied in this country and this undermines the principle of public access to the courts. It is acknowledged this is a contentious area, even more so in the internet age, that requires a balance between the judiciary’s need to ensure a fair trial and the media’s role as public surrogates in a courtroom.

But to the protest that it is not fair to single anyone out, the response is they are invariably people who are either held up as role models and trade on that, or they have built their reputations by courting publicity. They cannot expect to turn it off when it doesn’t suit them. Blue Chip and Hanover spring to mind here.

Sometimes, good reason exists for evidence or identities to be suppressed during a court case.

However, judges should use their power to suppress sparingly, impose orders for as short a time as possible, ensure that they are narrow in scope, and be precise as to their ambit.

Too often this is not the case.

As the Law Commission said in its review of suppression, on which the Bill is largely based: “Open justice has been regarded as an important safeguard against judicial bias, unfairness and incompetence, ensuring that judges are accountable in the performance of their judicial duties.” In a separate but related move the Law Commission has embarked on a year-long review of regulatory gaps in new media.

This is an attempt to find a model suited to the new publishing environment that incorporates codes of ethics and independent complaints bodies that the mainstream media are subject to. The mainstream media, anxious to see that its credibility is not under- mined, supports such moves and does not want to see open slather.

Free speech is precious but it is not absolute, it comes with responsibilities.

Attention seekers like Cameron Slater and Vince Siemer, who flout suppression orders and directly challenge the courts, deserve what they get – a $750 fine and $130 costs on each of eight charges of breaching suppression orders and one of naming a victim in a sex abuse trial in the case of the former and imprisonment on three occasions in the latter over an unwise and ongoing feud with Auckland accountant Michael Stiassny.

But how to deal with those using social media to communicate with an often wide group of friends? In speculating on the identity of the latest sports “star” who has slapped his girlfriend or whacked a stranger without cause in a bar fight, they may well be in contempt of court. Most doing so would probably have no idea they are breaking the law and do not regard themselves as publishers. But that is what they are.

This behaviour is not confined to witless teenagers.

The corporate sector is just as likely to be similarly buzzing over the latest anonymous property developer or director in the gun, or lawyer trying to escape drink drive publicity.

The solicitor-general, Dr David Collins QC, has also entered the debate with the release of a discussion paper on the law of contempt of court written by professor Tony Smith, dean of Victoria University’s law school.

Encouragingly, Prof Smith acknowledges the contempt law and its applicability are uncertain in too many aspects. “In an area of the law where freedom of expression is often intimately concerned, there is a danger that the law will exercise a chilling effect.” Too true.

THE dog’s breakfast that is the current contempt law was well illustrated in the 2008 contempt case brought by the solicitor-general against Fairfax and myself as then-Dominion Post editor over publication of extracts of police communications on covert surveillance of alleged terrorism activity in the Ureweras. (In referring to this case Prof Smith names the Pankhurst concerned in the first instance as Panckhurst, the same spelling as that of the High Court Judge. He is hereby acquitted of any penalty in confusing defendant and the judiciary, who may be equally well intentioned, but is given a finger wagging.)

Dr Collins’ case was dismissed but the respondents were criticised for “reckless failure” to ascertain the extent of suppression orders.

But as late as day four of the trial, the Crown was still trying to establish just exactly what confused suppression orders across several courts in different cities related to.

And the fact the defendants on Arms Act charges have still to come to court, nearly four years after the alleged events and three years after the Dominion Post publication, makes a mockery of any notion of publicity prejudicing a fair trial.

The law is struggling to cope with the explosion in instant electronic communication and it may well have to concede defeat.

Just as defamation is being rendered obsolete in an age when any reasonably well- known person may find content they object to fixed forever on their profile on Google and people are free to blog and Twitter on whatever half-formed thoughts come into their heads, suppressions will become harder to impose and maintain.

The best that might be achieved is an uneasy compromise where any problematic online material is required to be taken down, assuming an international service provider will co-operate or even engage, until a trial is completed.

However, being well connected or extravagantly wealthy or well-known or good at kicking a ball will no longer provide protection denied to the average Joe.

And that is no bad thing, provided the fundamental tenet of our legal system is maintained and protected – that a defendant is innocent until proven guilty.

It has never been truer that you can run, but you can’t hide. It is interesting that the more we have become concerned about privacy, the less privacy we in fact have. New Zealand enacted the Privacy Act in 1993 and established a Privacy Commissioner, but it seems this act actually started with the base assumption that we all had a right to privacy. Is that a valid assumption? Perhaps we actually have no right to privacy at all and perhaps that is a better state of affairs.

I would argue privacy is only the prerogative of those who have something to hide. The internet and modern surveillance equipment effectively mean nothing is private. Anything you put on a computer anywhere can be hacked, if you have an internet connection, and can be published.

If you do have something that is secret and it is important (and by the way, not much that we do is that important), the only way to keep that secret is never to record it on a computer that is ever connected to the internet, with or without all your snuggle-rug firewalls. Never speak about it or mention it to anyone on any electronic equipment, never talk to anyone about what you know, and never exhibit any product that can be reverse engineered. Talk very quietly and only to people who share the benefits of your secret. Hell, join the Freemasons.

Or alternatively talk so much, about so much, that no one knows what the hell you’re talking about, and the secret can safely be buried in the slag heap of irrelevancies. There is truth in the saying that the best place to hide is in a crowd.

In business, we sometimes work too hard to protect our trade secrets, and sometimes the harder we try to protect something, the more determined people are to look at them.

Does KFC really believe that no-one knows what their secret herbs and spices are? Of course not: what protects their business is great distribution, speed to market, critical mass and buying power.

How often do “bright idea” people debate the issue of raising capital to secure their intellectual property with global patents? Has Coca-Cola got a patent, or has it ever had one? No. The whole premise behind a patent is documenting and publishing your innovation and encouraging challenges to it which, if there are none, gives you a title to your invention for a period of time. In short, the exact opposite of secrecy.

Speed to market and a strategy around noise or silence is often the better approach. If, however, you intend to use external distribution via a licensing model, the large international distributors will not pay you a dime without a patent.

All you who have sought capital or looked at investing capital will have been confronted by the Non Disclosure Agreement (NDA) farce. Having sold a few businesses and having insisted on the intending purchasers signing these things, it is almost impossible to actually make these work.

The reviewer always gains knowledge of the competition or market place and will always be able to apply that knowledge. The worst example I ever saw of this was when a major chain retailer did due diligence on a smaller chain of specialty stores. They did not end up buying it but the concept was in effect copied to create a store-within-a-store concept in selected stores in the chain. As part of their due diligence they got to understand an alternative retailing concept, and they also understood the demographics that enabled this to work. The little guy is still in business, simply because big guys, even with lots of knowledge, are still tortoises, and their efforts simply increased overall segment awareness.

As an investor I have signed these things too. Mostly the things that are really secret are completely dopey. There is an inverse correlation with the magnitude of the secret and magnitude of the opportunity.

One example where I was asked to sign such a document involved a software project. The idea was robust, but when they finished I said simply that with a couple of twists I had seen a project with different architecture that was better advanced, which was attempting to satisfy the same perceived need. I told them that, regardless of this, they had a particular approach to commercialisation that had merit, but that it would make sense for these two companies to talk and deliver one exceptional product rather than two competing products.

The first one had not signed me up to confidentiality, so I called him and asked if I could give these other people his name, he said sure. They talked briefly but the first group tried to sign this other guy into confidentiality (a bit hard since he was in their space) and they both went on their way to do the same thing. Neither, to my knowledge, got anywhere.

This month’s publication is supposedly about when to speak honestly and when to shut up. That is easy – always shut up if you do not know who you are talking to and what their ethics are. Always speak honestly and openly with those who, having nothing to hide, speak honestly in return to you. And if you like this way of doing things, give up on the secrecy. If you crave privacy and secrecy, no-one can judge who you are and no-one will engage with you other than in reliance on documents produced by endless lawyers, and you will have to trust your secrets to the courts rather than to good people who you can judge.

So the short answer is always know who you are dealing with. If they cross you, publish it on the internet, and buy a whole bunch of search engines, so that the wolves dressed up as sheep cannot hide. The answer to good business is not secrecy – it is honesty and good ethics and integrity.

The first true professional sportsmen were bare-knuckle boxers. Following the resurrection of organised boxing in England in the late 17th century, over the subsequent century the sport quickly grew to replace horse-racing in popularity. But initially, most pugilists, albeit admired public figures, were not 100 per cent professional, dependent as they were on gratuities from successful punters backing them to win. In the 17th, 18th and the early part of the 19th century, the main purpose of all sport in England was as a gambling outlet. Elsewhere in the world, aside from festive events in some central Asian cultures and also Africa, organised sport was virtually non-existent in any serious competitive sense.

All of that began to change in the mid-19th century and as boxing promotion became better organised, paying spectators evolved into a major revenue source. Suddenly top fighters found themselves very rich men, a situation which compounded every decade. The advent of radio, then television and subsequently satellite television, all enhanced public interest to the extent that sport has now become an obsession throughout the world. As a result in respect of boxing, today, top fighters receive sums that are simply mind-boggling.

Mike Tyson, for example, was assessed as having earned over US$500 million at the time of his bankruptcy about five years ago. His story is an age-old one with many boxers.

So what goes wrong?

On my assessment the common denominator with all such sporting financial disasters is elementary, namely a failure to distinguish between capital and income. If you must live it up then do so with the investment income and not the capital.

Currently for example, Manny Pacquiao earns massive sums, probably circa US$100m annually from maybe three bouts a year plus sponsorships, and for what it’s worth, a parliamentarian’s salary.

But what has he to show for it? As his promoter Bob Arum remarked last year: “People believe the Philippines doesn’t have a welfare system. They’re wrong. There is one. It’s called Manny Pacquiao.”

His story is typical. An unschooled boy running about in the slums of Manila and 15 years later being showered with unthinkable wealth is not a formula for rational behaviour.

His expenditure of tens of millions on building schools and medical clinics in remote Philippines villages may be admirable, although less so his parasitical entourage estimated in a recent biography as 200 strong, who are eating up even more cash.

Most of those dependents are accorded roles, no matter how trivial. There’s one, for example who bears the responsibility of unrolling a small mat for Manny to do a particular five minute exercise on when he’s in training. On that basis he’s on the payroll.

If that sounds ludicrous, then it’s certainly not unusual and why I have little sympathy for boxers who earn and blow fortunes.

I recall at the 1975 “Thrilla in Manila” between Muhammad Ali and Joe Frazier, being in Ali’s dressing room in the days leading up to the fight when a row broke out. This arose when the man in charge of Ali’s right foot (putting on and taking off his right foot sock and shoe) inadvertently touched Ali’s left shoe and all hell broke loose as the left foot manager took umbrage at this invasion into his territory. Both right and left foot shoe-putting-on-and-off specialists were ensconced at the time in the Hilton with their sizeable families at guess whose expense. At the time Ali’s entourage was rarely less than 100.

You may well ask why minders don’t intrude and bring fighters to their senses. Well, they do and most certainly did in Ali’s case, but gave up when they realised they were wasting their time. The American Black Muslim movement “controlled” Ali’s money during his boxing career, specifically the founder’s son, Herbert Muhammad. I knew Herbert. He tried hard to deter Ali building his entourage of spongers but eventually gave up. He also tried to invest Ali’s money in commercial property and sought my input on some investments. But, typical of laymen investors, he was drawn to white elephants because they seemed bargains and eventually went through the lot.

Panamanian boxer Roberto Duran, another former street kid, earned many hundreds of millions of dollars and spent it as fast as he made it. Numerous advisors pleaded with him to put some aside in investments but he laughed in their faces. Today he’s broke.

Notwithstanding such foolishness, it is my experience that professional sportspeople these days are increasingly sensitive to their post-sporting future and their need to make hay while the sun shines and not go through their earnings.

Owning a sports goods shop or being a brewery representative lack glamour and are now no longer viewed as acceptable post-sporting career options.

Most wealthy retiring sportsfolk, on my observation, are attracted to becoming “investors” in their post-sporting careers, living the good life on capital profits and dividends. Sadly it ain’t that easy as so many discover, drawn in too frequently to ill-fated or gullible schemes.

About 15 years back, recognising the huge emotional problem which accompanies abrupt loss of sporting fame on retirement, the Australian Institute of Sport began courses to train retiring sports people to cope emotionally with losing their place in the public-esteem sun. Perhaps something similar is needed on the financial front with teams of advisors to guide retirees on their financial strategies and investment decisions.

That said, the desire by retiring wealthy sportsmen to be investors is certainly not confined to them. Over my life I’ve witnessed numerous professionals, particularly accountants and lawyers, end up bankrupt or in jail through the allure of “investment”.The attraction of putting down sixpence and getting back a shilling is age-old and universal.

Such investors are particularly drawn to property. If they indulge in development then inevitably they go broke as all developers have always done.

They also fall victim to the hugely mistaken belief that, in fits and starts, property values continually climb. The evidence says they don’t. As I explained in an IN-Business column last year, there is not a single commercial building in New Zealand today, that after deduction of its current land value component, is worth sufficient to rebuild it. In other words it’s gone down in value in real terms. To make gains from property requires a sophisticated knowledge of a large number of factors which very few people have.

Former sportsmen who earned fortunes only to lose it all through bad investments are a common phenomenon. In New Zealand I can think of dozens. The fate of some such as Adam Parore or David Tua reach the media but for every Tua there’s a dozen more the media keep quiet or don’t know about.

CRICKET and sunshine are the two things that vie for importance in my world next to economics and numbers. Mind you, they are related. That is, you cannot have cricket without sunshine. And, to be honest, sunshine is not really of much use unless there is a cricket game to watch, score, play and/or umpire. Some fanatics might argue that numbers were invented for cricket, but I could never go so far. However, cricket without numbers (and the myriad of statistics that can go with them) is clearly meaningless.

That leaves the relationship between economics and cricket. I will admit that this relationship is not widely understood, so please allow me to clarify.

While economics may not be a team sport, an economy will not function efficiently if its constituent individuals or members are not operating to their potential. And the relationship between the members is critical. If the dairy processing sector is underperforming, then the team is operating under a severe handicap, irrespective of how well the dairy farming sector is going.

Difficulties in posting a respectable innings total when our batting openers are not performing are unfortunately all too regular in the New Zealand cricket experience. Likewise, accumulating a sufficient export earnings total will not be easy if the foundation is not set by the openers. For the New Zealand economy, the openers are probably a choice between dairy processing, tourism and meat, given their lead status in terms of export receipts. However, the recent export recovery has been dominated by the forestry category, with it pushing its case up New Zealand’s batting order. In contrast, tourism has struggled to recover, with annual earnings down about 7 per cent on the previous year.

Undoubtedly, these four categories will jostle for supremacy in our batting order over the coming months and years. But cricketing purists like myself would point to the cardinal rule that your best batsman should always be sent in at the loss of the first wicket. But, like our national team, it is not as if we have an embarrassment of riches in order to adhere to such niceties. So, at present, I’d gladly accept any who are willing to step up and take guard.

However, our choice for openers could well multiply in the near future.

Rising up through the order are education and oil, both having recorded double-digit annual growth rates over the past decade. These growth rates are admittedly off low starting points, but they both now contribute a sizable contribution to our annual score. Admittedly, education export earnings suffered a severe loss of form – slumping to under $2 billion in recent years. But this contribution has again returned to above $2.1b in the last year, although still below its high score of $2.4b recorded in the calendar 2004 season.

Then there are other young guns, like kiwifruit and wine, pressing their case for inclusion in the top tier.

In addition, there are many “other services” categories that individually remain small for our top order rankings. But, together, these categories accumulated a not insignificant $3.9b total last year to form a promising middle order tier. The categories here include computer and information services ($360 million); personal, cultural and recreational services ($280m); legal, accounting and management consulting ($270m); communications services ($260m); and royalties and licence fees ($240m). The film industry efforts (currently part of the cultural and recreational category) may also be looking for inclusion in the team, perhaps for the shorter and, allegedly, more entertaining version of the sport.

BUT if export earnings are runs on the board, what is the equivalent of the wickets? And, consequently, who are the bowlers? Acting as a break on export earnings are inflationary pressures. When inflation stalks the landscape, export earnings become harder and harder to accumulate. And when we are able to tackle inflation better than our competitors then the export markets and accompanying dollars flow in our direction much more easily. Mounting inflationary pressures while garnering export dollars can be seen as the equivalent of losing wickets during the accumulation of runs.

So, the bowlers in our team are the engineers, researchers, scientists, marketers and the industry training providers trying to keep our business ventures just that little bit ahead of the rest of the pack. For these are the team players in the frontline of our inflation fight. As any economist will (or should) tell you, the only anti-inflation strategy that will be successful (or sustainable) over the long term is ongoing improvements in the level of productivity. Other options are not much more than short-term sticking plasters. And productivity improvements require effort in the form of research from the inquiring minds of scientists and engineers. The development of new business and production processes, the enhancement of skills to apply finely-tuned equipment to its utmost potential, or the nurturing of new customers in far flung places.

And if our bowlers are better than others, then we will fare relatively better in the inflation stakes. Consequently, our batting order (exporters) will be much better positioned to face the competition and so more able to accumulate runs (export dollars).

SO, you see, there is not that much difference between economics and cricket. And what can one learn from the other? As any purist will inform you, cricket is best when it is played over a lengthy period – the longer the better. Economics would do well to take note of this long-term horizon. Cricket should be played, at least, over five days. Similarly, economics should be looking at five decades (five years is much too short for any investment to really pay off, and five generations is probably taking things a bit far). The first two decades is when the top four have laid a solid foundation in export earnings and built momentum for the further accumulation of income. Thereafter, the scientists and engineers et al. come into the equation to ensure inflation pressures do not eat away at the foundation.

Clearly, the policy-makers are the umpires (including the review authorities interrogating the video replays). But, I hear you ask, where do economists fit in this world? Well, with my econometrician colleagues in charge of the scoring and associated statistical regressions, you’ll find me in my natural home – the commentary box.

LIKE cricket – especially the way the Black Caps play – fishing can be described as organized loafing.

To be lying back, lazily watching the rod tip for the slightest twitch as the tide flows and the sun tracks across the sky, is bliss.

And the beauty of surf casting is that for most the catches are so rare, there is no need to be concerned about messy gutting and filleting.

The adage that 10 per cent of the anglers catch 90 per cent of the fish is well aimed.

Just as in business, as in life, those who are educated and organised are so much more successful.

From a vantage point opposite a wharf on Wellington Harbour, the techniques and behaviours of participants in New Zealand’s number one recreational activity have been closely observed for the past five years.

There is a perversity among the fishing fraternity – the worse the weather the keener they are. And they have plenty of opportunity in Wellington.

There is hardly a day, maybe never, when someone is not casting a line.

At night the predominantly Asian crab potters take over, baiting their traps with greasy chicken carcasses at 50 cents each from the supermarket, leaving their rubbish on the wharf despite a nearby bin that is emptied daily, and unwanted sea creatures – starfish and hermit crabs – to a slow death as the sun rises.

The few fish that are landed are varied – rare snapper, much more commonly caught kahawai, stingrays, elephant fish, undersized blue cod, red cod, garfish, spotties, mackerel, herrings.

The outputs – fish caught, that is – are miniscule in terms of equipment costs and labour.

While efficiencies could be markedly improved, intangibles like peace of mind are more difficult to quantify.

The wharf dwellers can be broken down into four broad categories.

There are the hustlers, parking their big shiny 4x4s on the footpath and bustling out to land the prize.

These are the entrepreneurs, proud of their success and keen for all to know of it.

Armed with forests of expensive rods, they are there to do the business and look out any fool who gets in their way. They object strongly to their catch being measured and compared with others. They are willing at times to share excess capacity after cleaning up but on their terms, which include due publicity and advertising concessions.

The most thoughtful and most elegant anglers are the Lloyd Morrisons of the business world. They are the ones who study their catch and are innovative in securing it. Not for them wasting time and resources vainly fishing frigid winter waters. They will arrive with the right research and infrastructure – blended oil and bread berley, tailored tackle – and then proceed to apply it.

They are invariably worth talking to, friendly and knowledgeable and confident, in control of themselves. They know about the life cycles of the species they target, the mysterious pull of the moon on tides, the patterns of the seasons, that not everything has a monetary value, the artistry of everything from a spinning reel to a red phone box.

The aforementioned noisy night crabbers are the Hotchins of the world – rapacious, uncaring of their impact, unmindful of their behaviour and leaving others to clean up their mess. They operate most successfully away from sunlight and scrutiny.

They are ever ready to offer a slice of the paddle crab action but they are apt to borrow from others to pad out their offering and then leave your pot empty. Or worse still, the catch may have escaped but you still owe on it.

But the majority just amble up, content with the excuse of catching herrings for the kids when their offspring have long since lost interest, or of just throwing a line out and hoping for the best. Their hooks are too big, sinkers too heavy to feel the first delicate interest of a fish, the bait stale and if asked about the state of the tide, have no idea whether it is rising or falling.

These are the type who think due diligence is the name of a horse in the fifth at Trentham.

They are the majority content to bumble along in blissful ignorance even as the tide slips away and a barren shore exposed.

If they do venture into the tricky business waters, it will be to sink their savings into a sandwich shop for the “lifestyle”, only to find a Subway opening across the street.

And if it all gets too hard, they reason they can always migrate to Australia. The fishing’s not as good but they never catch anything anyway and the shopping malls are bigger and they might spot Kath and Kim.

Then there are the loners, taking heed from no one and secure in the knowledge they know best.

One night, having spotted a bent rod and furious battle and fuelled by excess wine at a dinner party, we went across to offer advice.

A furious stingray, its wicked tail and poisonous barb searching for a target, thrashed in the surge of a rock pool.

“If you were a real man, you’d kiss it,” the angler was told.

He looked in disdain before turning his back and wordlessly cutting the line.

Sometimes it is best to cut your losses and go your own way.