Tradeable economy – Thinking by Selwyn Pellett at TEDxChristchurch 2013

On Saturday TEDxChristchurch held their annual 2013 event which is the 8th event by the Christchurch team. The day was divided into 4 sessions with a selection of speakers and other performances in each session.

The 4 themes chosen were:- Exploration, Justice, Citizenship and Urbanisation. I wasn’t there in person but the whole event was streamed live and so I was able to catch a number of the sessions on the day and some more since then.

selwynpellettOne of the sessions I was particularly looking forward to was by Selwyn Pellett who is a leading visionary business person based in Auckland.

Quite by chance on Friday and Saturday there were 2 topical articles on how investment affects New Zealand. The first article NZ foreign investment rises by $5b it was noted that NZ businesses have 163.9b invested offshore.

That is generally seen as a positive number and evidence that NZ businesses ( and investors) are growing up and managing risk. The very next day Brian Gaynor ( financial analyst and investor) posted a column New Zealanders buy back their sharemarket

“in mid-2013 New Zealand investors owned 67 per cent of a domestic sharemarket worth $72.9 billion”
…but
“Meanwhile, the total value of the country’s residential housing stock has surged from $81 billion in 1986 to $183 billion in 1995 and $690 billion a few months ago, according to Reserve Bank figures.

More and more of our personal wealth is tied up in residential property as the ratio of house values to the amount we have invested in the NZX has gone from 2.0 times in 1986 to 14.1 times by mid-2013.”

Those numbers give an idea of what is wrong with the NZ economy. In simple terms the productive part of NZ Inc represented by the NZX is completely overwhelmed by the over investment by kiwis in property generally.

There is a risk with over simplifying to this level because the NZ stockmarket only captures a small part of the NZ economy ( many private companies unlisted) and foreign investors also have $315b invested in NZ but it is a useful comparison to make.

The big question is what can we do about this individually and as a nation? Selwyn shared his experience and we are grateful for those insights. His background:

“In 2001, after a long history of working with multinationals, Selwyn Pellett decided he had enough. With $250,000, he co-founded Endace Ltd and Prolificx Ltd (now iMarda) and led both companies as CEO. These two companies have collectively exported close to half a billion dollars of premium margin (70% +) exports, and Endace was the first and still only New Zealand registered company to list on the UK’s AIM. He has also founded and invested in a number of other companies, from natural skin care to trucking.

Since 2003, he has been outspoken about policies that he believes have led to economic risk, extreme wealth concentrations and the erosion of economic sovereignty. In 2012 he visited top economists in the OECD, IMF, and World Bank, as well as Nobel Prize-winning economist Joseph Stiglitz, to further enrich his worldview.”

The clip below has been updated to the YT version now that is available.

Selwyn has some great insights into the difference between the speculative economy and the tradeable economy. He urges us to take a longer term view and “think like a grandparent” and to change the policy settings so that we are building a future rather than repeating the same old mistakes.