Yesterday morning just before I headed out to a couple of meetings at the uni, there was a knock at the door. It was 
someone who lives a couple of streets away, and who was the realtor who sold us our house. (I’ll call him John for the purposes of this story). He and his wife are splitting up, and he told me that he was about to put his house on the market. He wanted to know if I knew anyone who might be interested. John then went on to tell me what he had originally paid for the house, and that he didn’t expect to get anywhere near that price in the current market. (Property values in this area seem to have been going sideways for at least a couple of years).
I told him that I would be happy to tell friends about his house, but that most of the people that I know who are looking at a possible purchase in my local village or the countryside around, have noticed that there is a lot of real estate that has been on the market for a long time. Their simple analysis is that asking prices must be out of step with market reality. So they are sitting it out.
It is a classic case of a deflationary state of mind – “if I wait longer, price will go down”. The problem with this, of course, is that unless market realities are met, the concept of waiting longer becomes a self-fulfilling prophesy that is so embedded that even when prices go down, buyers want them to go further down…. leading to a never ending spiral into market oblivion!
My neighbour, John, is not a believer in that. He is actually an extremely good salesman when it comes to real estate. He gets the who concept of the potential of deflation big time. John’s franchise operation is up in the next little hamlet up in the hills and his comments about the broad market were rather interesting:
Here is a digest of what he told me:
His sell-through rate for the current calendar year in his area is approximately 23 houses sold. This is against an average for the realtors in my local area which is apparently 12 – 13.
Median prices of transactions in his area are running about 10-12% higher that in my local area. He told me that this is contrary to accepted practice for the local economic area, and this ratio should be in reverse.
He gave me his reasons for what is happening: He said that the local realtors in my local village establish unrealistic price points for property that they put on their books. They do this in order to impress the vendor and to win the listing. In a bull market, you can do pretty much anything and the purchasers and vendors come to an agreement about price, so you get to a sale. In a static market, which we very definitely have, unless the realtor manages vendor expectations, sales don’t eventuate fast enough and then prices go much much lower when sellers start to feel the pain.
His case in point: A house in the last 12 months that was listed at $1.5M by another realtor. John thought that the market value price of the house should be around $1.15M. He told me that if he had listed this particular house he would have put a sticker on it for $1.25M and would have been able to close a sale at his target price fairly rapidly. As it happened John had a client who was interested in making an offer which was $1.1M. The agent representing the vendor was unenthusiastic about recommending that price to the owner, and downsold the practicality of it to the vendor. As a result the offer was rejected. John’s client didn’t make any further offer, but instead moved on to look at other properties and bought elsewhere. The house stayed on the market for a full year, and has recently been sold, but has realized a price just under a million.
So from the point of view of all the participants this has been a bad exercise. The vendor had the continuing cost of maintaining the house for the period in which it was on the market; the vendor had the continuing costs of capital, either through debt or inability to access cash tied up in the property; the realtor ultimately had to take a commission on a lower number than he may have liked…. And everyone’s properties in the area is, as a result of this, a little less valuable today than it was a year ago, whereas if the property had sold faster at $1.15M there would be market momentum and a less negative impact on real estate values.
I asked John about a property that has just gone on the market and is near where I live. It is one acre block of land with a run down fibro house on it that is essentially a tear down. But it is on prime quality land, that is the best dairy country in the state. The place is listed at $575K. I asked John what he thought about that price.
He told me that he thought it was a great case study of exactly what was happening elsewhere in the area. He thought that the real market value of the house was $45oK. His view was that it should have been listed at under $500k to generate a quick sale. He said that the underlying land value would be $350K and that, while it is a tear down, the existing house would have the ability to generate some cash flow from rental while plans were developed etc, and as a consequence there needed to be a slight uplift beyond raw land value. His view was that this house, like so many in the area, will stick.
So this area is now caught in its own deflationary spiral waiting for something to break. I can’t imagine that even the most cashed up realtors in the local village can survive very long with only 12 sales in a year. If you figure that these days they would earn a commission of 2% and the average house price would be in the region of $875K, they would generate a shade over $200,000 in a year, which may be a good living for some, even after overheads. And it would be the overheads that would be crippling.
In the meantime all the people in the area who want to sell, are going to find themselves in a long, long line with no end in sight.
How much does this quietly impact the local economy? It may not be something that is highly visible, but it clearly means that there are less builders employed (people who buy, invariably renovate or upgrade); it means that council services are not upgraded (people who are selling are more interested in getting out, than in ensuring that the local infrastructure is performing optimally); and in a more general way, when new people come into town, and have cash, they are going logically going to buy a lot of consumer items locally because it is easier. All these contribute to the local economy in a quite significant way.
Last Friday I gave a brief presentation on scenario planning, to the research groupthat I consult to.
English: Original caption: “Trends in Research by Agency, FY 1995-2011, in billions of constant FY 2010 dollars. FY 2009 figures include Recovery Act appropriations. Research includes basic research and applied research.” (Photo credit: Wikipedia)
One of the things that came out of that all too brief session was that there is a very real lack of understanding of interdependency of nations and of industries in a globalized economy.
It is remarkable how little people who are involved in medical research, for instance, understand the potential for the results of the US election this coming week to have indirect, but highly material, impact on the funding of medical research.
Equally, researchers need to understand and appreciate the potential for there to be impact to research in Australia in the event of there being either a hung parliament in the next Australian election or in the event of a strong government that is Labour or a strong government that is Liberal.
Each of these, together with the impact of fiscal policy, will impact research funding. Similarly research funding will be impacted by the continuing rise of digital technology as it impacts universities and as online open courses erode the education / degree factory business model…
Scenarios give us at least one way of quite logically interpreting the future by taking a much keener interest in the present.
Aug 12
28
You Are Special… Celebrate It
I have come to the conclusion that all of the personal coaching that I do, either through mentoring
English: Personal coaching is about bringing into your awareness who you really are (Photo credit: Wikipedia)
creative people or teaching comes down to one thing: transition.
We are all in constant transition: moving from and moving to. How can we take some control over where we move to?
One key thing that I do with the students in my ARTS301 class is to get them to focus on writing a CV that captures the uniqueness of each of them. It took me years to figure out how to write a good CV, so I know that it doesn’t come easy. However, I believe that being able to develop a clear and purposeful CV is a very important discipline, just as I think being able to write a business plan is critical when starting a business. Writing things down requires that you think carefully about what it is that you want to do and how you are going to do it, and the implications that flow from your intent.Working through the problems that you encounter as you do do helps improve the way that you think and makes an investment in your business or you as an individual less risky and more appealing.
The CV is not only about crystallizing intent. It also helps you reflect on what makes you individual and special. When my students start writing their CVs they naturally tend to concentrate on putting down on paper the things that they think are important. So I see references to the description of the job that they did rather than what they learned as a result of it. I tend to see very little about the essence of them as human beings.
So at some point I ask the students to share with me and their fellow students one important fact about themselves that people would not know under normal circumstances.
At the class last Friday we conducted the exercise.
The results were remarkable. We found out about the young students who had rebuilt schools in Indonesia after the tsunami, who had helped rebuild villages in Cambodia, about a student who had been a refugee of the war in Sarajevo, about a student who had been a miracle baby, born after her mother had given up hope of successfully having a baby. It turned out that every student had done something remarkable in their lives; something transformational that showed they had depth and dimension in their character.
I try to get them to find a way to express their uniqueness in their CV, so that they understand that every experience that they have had is quite unique, and it is what they take away from the experience that is of interest to a future employer and not just the raw fact of having worked in a particular role for a period of time.
The methodology is perhaps an adaptation of appreciative inquiry – helping to identify and then celebrate good experiences and build upon them. For me this process of identifying unique experiences is a way to help people on the road to self-actualization and understanding their own authenticity.
Posted in Course Material by .
Innovation has been a hot topic for quite a while. Recently it seems to have gone mainstream. Companies want to
Innovation (Photo credit: Seth1492)
innovate. Universities want to innovate. Governments want to innovate. Why? Because if you are not profitably creating new ways to solve problems, someone else is, another company, another country…. and the ownership of the knowledge of the how, of the underlying intellectual property, of the processes… these all add up to becoming economically superior and sustainable.
Over the last few years I have spent a good deal of time thinking about innovation and ways to deliver it. My take on innovation is that the critical ingredient is to encourage and motivate young graduates from university the tools of the trade of entrepreneurship, company formation, wealth creation, and more particularly how social systems work that provide wealth for investors.
This week two things happened that I found interesting and worthy of sharing. First, I went to a conference/forum focused on innovation: Innovating Innovation Australia. A small group of successful and battle hardened veterans of business – and academia – met to discuss how to generate more traction for innovation in Australia – i.e. for taking invention and ensuring that it has value to the market.
Some people at the conference suggested that we should be lobbying Tony Abbott, since clearly there is going to be a change of government in the not too distant future. One of the things that I feel passionate about in this regard is that there is utterly no point in trying to engage with any of the political leadership in Canberra at this point in time. I said publicly at this forum what I have said privately before to friends – many of whom are successful and wealthy business people: “We have a lack of leadership in this country on both sides of politics, and under those circumstances it is the responsibility of the people to act to deliver solutions and not to look for any kind of favour from Canberra”. That doesn’t mean that we should revolt in the streets or anything like that. But it means, in my view, that we should stop trying to involve government by lobbying them for assistance, and instead, we should get on with acting, and arrange our affairs in the optimum way for financial benefit. Then report to government what those actions mean to the nation. We live in a world driven by metrics. The only way that we should expect people to respond usefully, when they are in positions of power, is by showing them the numbers.
In the case of Australia, where for instance, tax laws are totally out of step with those in the US, for entrepreneurs, we should be showing government as accurately as we can, how businesses that produce incredible capital growth are leaving the country. One business that I have had a close association with during the planning stages, and which is going to be funded by US based venture capital is going to be created in Singapore, for exactly this reason, with a subsidiary in Australia. This will mean that the company will avail itself of grants from the government, but the majority of the IP will be housed in Singapore, and the capital value that is created will be off shore. Ludicrous, isn’t it? That an innovation from Australia will become valuable, not to Australia but to Singapore. But this is how capital functions. Government won’t do anything about this unless they see it happening. There is no point in warning government and trying to get them to act strategically. There aren’t any votes in it.
The matter of normalization of tax laws is made even more shocking if you look at the way that Australia works with the US in the matter of intellectual property protection. Australia signed off on ACTA, the trade agreement for the protection of copyrights. That agreement is so incredibly oppressive that most Eurozone countries have rejected it. Yet, in this country, we ratified ACTA and we didn’t amend our tax laws. We have tax laws that require people who participate in company formation, to pay tax on options as if the options were real cash – unlike in the US, where there is no capital gain on an option, because it is just worthless paper until the cash is realized!
The other thing that happened this week that has bearing on this, was that I was sent a contract by the university where I do part time work. I have had contracts with the university before and have just signed off without too much thought (not a smart thing to d0, I agree!). For some reason, this time I read the agreement more carefully. I noticed a clause in the agreement that said that by signing the agreement I would be bound by the university’s IP policies. Since I have a role in a number of businesses where I assist with ideas that sometimes lead to the creation of new IP I was a bit concerned about agreeing to something that I was not in a position to deliver on. I have this rather quaint concept in my head, drummed into me by my father, when I was a teenager, that integrity is the most important thing that anyone owns. There was no specific allusion to what the IP policies were in the agreement, which I thought was strange, so, after making some inquiries, I went looking for them.
I found them, after drilling down through the website. The policies are so utterly onerous with regard to the possible and hypothetical creation of ideas that I sent a copy to an IP lawyer in Sydney who is a good friend. I asked him for his comments. I noted one clause in particular, which dealt with the methodology for dealing with the creator in the event that the university was either unsuccessful in, or disinclined to commercialise.
His informal response, in part, was as follows: “The quote you cite is indeed preposterous in its second half. The bit “provided that the Creators have been cooperative” would result in long-winded back and forth legal trench warfare, which only those with money behind them (the university) could sustain.”
My belief is that if government is to play a part in assisting in the birth of innovation, is that they should regulate that universities may not ever take a controlling position in any piece of IP that is created; that the inventor should always have the majority of control. That way the entrepreneurial spirit becomes the driver. The universities will reap their rewards from the downstream economic activity.
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Aug 12
10
The Solar Decathlon Project
The Solar Decathlon has been called the “solar olympics” by some people. It is a regular global competition
Solar Decathlon (Photo credit: afagen)
sponsored by the US Department of Energy to build a totally sustainable house.
For the first time there is an Australian team, the team from UOW and they have a really good value proposition for their entry. It is that in 2050 more than 70% of the housing stock in use will have been built before 2012. All new houses inevitably have a sizeable CO2 footprint. Therefore retrofitting existing housing stock is of strategic importance in order to achieve CO2 neutrality. Pretty blindingly simple, when you think about it. You wonder why no one has before!
The task ahead of the team is quite monumental: other than the competition itself, which requires the team to build a house locally, which has to be designed first, they have to be able to knock down the house, ship it to Datong in China (in the heart of coal country) and then re-build the house over three days. To achieve all of this they have to also raise capital, build a media profile bar none, and learn from the ground up, project planning, building, media, management, and capital raising skills. Each one of these is no small task.
I have been mentoring and coaching the team leader, Lloyd Nicholl for the last few weeks to enable him to develop the confidence and skills that are required to manage a loose group of students, all of whom are busy with their main tasks, which are to keep their course work up to date. Most of them have part time paying jobs as well in order for them to support themselves on the way through university.
This is truly a remarkable group of people. Every one of these students has both a strong work ethic and a tremendous social heart as well. These are, in truth, the leaders of this country that we don’t have at the moment, in Canberra – young people driven by a desire to improve the world through actions rather than words.
They have recently launched their facebook page so please go along and like it. It needs support!
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May 12
28
X Media Lab And Hyperconnected
In the next month in Sydney there will be a lot of attention on connectivity.
recreating the mass media (Photo credit: Will Lion)
First there is the XMediaLab conference and the accompanying workshops to be held at the Sydney Opera House. Then there is a much smaller event to be held at the Sydney Business School – Hyperconnected.
Both of them are working to provide a glimpse into the future of the impact of technology on media, and the impact of media on society. Hyperconnected is different in that its focus is on the importance of geography on culture, and how a true high speed broadband digital artery between the countries in the same time zones as Sydney will work together to create media. And for that media to have significant societal impact locally and then globally. Should be provocative and interesting!
One of the most difficult things to do these days is to focus.
Button image for use in templates - Resistor (Photo credit: Wikipedia)
There are so many distractions vying for our time, and while we may think that we can multitask, parallel process, and generally do everything, the reality is that we still live our lives in a linear way and to achieve great things we need to focus.
The big question gets then gets to be what to focus on.
A lot of people find it very difficult to look beyond the system itself. They see the whole and that is as far as it gets. This is a product of a lot of things – and it starts with “the complexity of everything”. The complexity of everything is what you get when you integrate digital technology into what used to be relatively simple tools and devices. The telephone was in its first incarnation an utterly magical device in terms of the difference it made to society, and yet from a technical point of view it was quite simple: a few very simple electrical circuits connected by copper wires to a network that was physical, that a relatively unskilled engineer could service and fix. Now we have smart phones that have extraordinarily complex circuitry, which you throw away when they break – they are too complex to fix and the cost would be greater than replacement.
Virtually everything that is digital is really complex.
People are becoming used to this and now not only do they assume that they will never understand what goes on inside the “black b0x” but they also form the view that everything is complicated, and therefore they don’t need to know how things work. Someone else will do that.
But what this leads to is that people don’t take the time to think about how systems function. Because they don’t think about this they don’t realize that to build anything of value you have to be able to construct the system architecture at the outset, and if you want to understand why systems go wrong, you have to be able to de-construct that same architecture in order to understand where what I might call “the fulcrum of understanding” exists. By this I mean the key idea in the system – the concept that is the reason for the device’s existence.
This is often not what you might think when you look at the device or the system from the outside. Sometimes in today’s complex management systems the rationale for existence lies a fair way distant from what we see from the outside. Take Google as an example: Google indexes the world’s information. But it has to make money to afford to do so. It does that by selling access to words. That is a long way from me searching for some inspiration for a lecture that I am going to give…
In establishing businesses and in identifying how to fix businesses that are broken, the investigation of the system architecture of the business is a key ingredient to solving the big problems. It takes a lot of skill and a lot of time and often a variety of skills. It requires an ability to reframe problems too.
The key to this is to understand that to deliver an outcome often you have to focus not on the end goal but on the tactical goal that is the entry point of solving the problem and in getting to that point you find that you discover a lot more about the end goal and how to get there than where you started. I work with students who forget that to get hired first you have to figure out how to get interviewed. Equally I work with CEO’s of companies who forget that in order to raise capital you first have to get an understanding of what your investor is going to want to see you present….
And the more that the devices that we use become complex, the more difficult it is for people to appreciate the need to identify where the fulcrum of understanding lies. Finding it is the key part of developing strategy.
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I have a lot of interactions with students these days.
Social-network (Photo credit: Wikipedia)
I teach a class of students who are primarily going to graduate in the next few months with degrees in media and communication. In addition I have a research project that involves PhD students from the sciences in interviewing CEO’s of corporations in high tech industries. And then I get asked to mentor people from time to time….
Recently I was asked to provide some guidance to one of the members of my rather large extended family. Large because as children and godchildren and nephews and nieces get married, the tendrils of relationships continue almost infinitely into their own social network.
The guy who I was asked to help is about 30, and has a marketing background. The company that he has been working for is a small creative shop working in the digital/social space. It is apparently going through a transition, the net result of which is that he is being let go. Tough thing to have to deal with and its something that a lot of people are going to experience in the next few years in Australia, in spite of the fact that this country has been largely insulated from the impact of globalization in jobs outside of the manufacturing sectors.
What was the first thing that I did, before even talking to him? Look at his LinkedIn page. It was pretty ordinary. Very thin amount of information. Only the bare bones in fact. When I spoke to him on the phone I talked a bit about his experiences and his goals and ambitions and what he had been doing and all those things that I know recruiters like to find out about. I realized pretty soon that he just didn’t get it. He hadn’t built a network of people who would endorse him and help underpin his goals. He had no endorsements…. He demonstrated an utterly naive view of how the world works.
I got him to start working on building up the information, improving the way that he looked at himself and the way that he presented the information that is online.
Its a long way from being perfect but its a vast improvement.
Then I got in touch with a recruiter who I know and asked her if she would mind talking to him – no reference to LinkedIn mind you. I asked her if she would mind taking a meeting with him and cc-ed him on the email to square the circle.
She very kindly agreed responding almost immediately. Her closing comments on her email were: “I will have a look for you on Linkedin also so we can fully connect.”
For her to even talk to him, the first step is to look for him on LinkedIn. Not surprising at all to me. But it tells you something: If you are not using LinkedIn right now to present your professional self to the world, you are not really in the game.
I don’t have any shares in LinkedIn, and along the line may find something equally or more powerful, but that is in the future. Right now, investing the appropriate amount of work in LinkedIn is the most important investment in time that you can make.
And by the way, doing that effectively is
.
Apr 12
2
Google: The New Weed Killer
WikiWorld comic based on article about Disruptive Technology (Photo credit: Wikipedia)
Google is a transformative technology, of that there is no doubt. However its ability to effect change are creating some unforeseen business impact.
I was talking to someone on the weekend who has some keen insights into the ecosystem of grass… Yes that’s right – that cash crop that everyone knows is at the heart of many economies but which no one will admit any personal knowledge of.
He was telling me that supply is drying up because of the improved resolution of Google Maps which is aiding the police in improving their productivity. Apparently the improved resolution means that the police can use Google to search a landscape looking for pattern changes in rural growing areas that are indicated by: irrigation systems, changes to game paths through bushland, etc. Once identified, they send in choppers with thermal imaging capabilities…
It shouldn’t be remarkable that disruptive technologies not only disrupt legitimate businesses such as P2P disrupting the music business, but also disrupt established supply chains in illicit businesses! However I thought it was an interesting twist.
Posted in Economics by .
Mar 12
24
How Do You Motivate Real Change?
I was at a conference yesterday in the nearby town of Nowra.
Nowra Bridge (Photo credit: Wikipedia)
It was put on by and for local business people. As the
organizer, Linda, said to me, its the kind of event that when times are tough, small business people should participate in and attend.
I talked about disruptive technologies and how they could change for the better and for the worse those people and businesses – that either embraced them or ignored them…
One of the questions to the panel from a local lawyer who is a mover and a shaker in the town was what of these new technologies could help generate interest from the 25-39 year olds to visit and to move in to the town. (f you don’t know Nowra you might want to know that this is a town that has been hollowed out economically for a long time. But it has a naval base, part of the UOW campus, and a substantial amount of light industry in it). So you would have to think that with these ingredients there would be the basis for real economic growth.
My immediate suggestion was for the town to install free wi-fi. A bit lateral perhaps and as it happens this is about to happen!I figure that with free wi-fi you have a platform for local business to advertise to people who log on, you get to capture a whole lot of information about customers, and you create a reason for people to spend time in the town centre too. While they are walking around they are going to start shopping.
My second suggestion was that they need to create a new industrial hub in the town and it has to be one that is “smart”. My suggestion is that the town should create an incentive for a technology business in the health sector to come to town. The incentive could be a long peppercorn rent on industrial premises for instance. A company that requires highly skilled workers who have degrees brings in people who want good schools, good services, good shopping and products, and have disposable income. It will help change every sector of the local economy as well as requiring unskilled labour for the basics. The more highly skilled jobs you create in a town the more you drive all sectors of the economy.
But it does need incentive and that means that the local council will have to understand that a commitment is required.
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