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NO B.S.FRIDAY: It’s not Malcolm. It’s democracy. Duh!

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I saw a newspaper article the other week about the fractious nature of modern Australian politics. Malcolm Turnbull has now lost 30 Newspolls in a row – the number he pointed to when he rolled Tony Abbott.

And now the sharks are circling.

And so it looks like the revolving doors of Prime Ministers is about to take another turn.

How bizarre! How strange! Who can understand politics these days? What is wrong with people?

But I’m hearing this and thinking why are we talking about politics, or even politicians, or even voters.

It’s the system, stupid.

Because there is no centre. It’s a fiction.

It’s this kinda of silly idea that on all issues there is a common centre. That there is some sort of political middle-ground that some fictitious Prime Minister could occupy that wouldn’t offend too many punters.

It just doesn’t exist.

And there’s two reasons for that.

First, every individual is different. Even if you could find two people who passionately agree on 99 things, there’d be at least one issue that they’d come to fisty-cuffs over.

And so even within die-hard Liberal or Labor supporters, there’d be areas of disagreement.

For example, I might be pro-tax cuts. But I might also be passionate about the rights of transgender orang-utans in old growth forests.

That means that right now, there is no political party that can represent my interests.

So being part of a major party, or backing any Prime Minister, is necessarily an act of compromise. If I’m going to back the Liberals, then I’ve got to be willing to accept that my orang-utans will be hung out to dry.

But this isn’t the age of compromise. This is the age of bespoke customisation. This is the age of choosing exactly the right phone case that expresses my unique soul.

I want my internet service provider to cater exactly to my needs. I’m in no mood to compromise.

And so if you want people to settle down and just get along with one Prime Minister, then you have to ask them to let go of their unique preferences.

But people might be well in their rights at that point to say, hang on, if the system can work with my needs, isn’t that a problem with the system?

Isn’t a system that mashes every issue into a simple spectrum of left and right, just a bit broken?

And isn’t a revolving door of Prime Ministers just a symptom of that broken system.

You know, maybe the problem isn’t us, you miserable bastards.

The other factor here is echo-chamber media. With the rise of Facebook et al more and more we’re getting a news feed tailored exactly to our prejudices.

That means that we think that pretty much everyone agrees with us.

That also means that our sense of where the centre is, and what a reasonable compromise might look like, becomes highly skewed.

“Hell no. There’s no way I’m willing to compromise on my orang-utan sanctuary. This is like the number one issue in my news feed right now. The only people opposed to it are fringe lunatics.”

And so you see the political parties getting pulled apart by their supporters. From their supporter’s perspective, they’re being too soft. They’re making too many concessions. They’re drifting too far from where they think the ‘centre’ actually is.

And what would have been seen as simple political negotiations in a by-gone era is now seen as ‘selling out’ to the enemy.

Off to the guillotine with you.

So of course ‘the centre can not hold’.

There never was any centre to begin with. It’s was a fiction from the beginning.

All we’ve got now is a situation where the robes are being pulled of the naked emperor, and everyone’s frustration gets taken out on the sitting PM.

I don’t know where we go from here. But this is a problem that needs to be fixed.

Democracy, as we’ve known it, has past its use-by date.

What keeps Trump up at night ? (and it’s not Melania)

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Why is Trump scared about the trade situation with China? Is it the robots?

Back in World War Two, America put 16 million soldiers into uniform and sent them to the front line.

They couldn’t do it again.

Why not?

Well, back then, America had a solid textile manufacturing sector. Gear that sector into overdrive and you can produce the millions of uniforms necessary.

These days, there’s no textile sector, just like there’s no textile manufacturing in Australia anymore. In fact, that sector was one of the first to be completely ‘off-shored’.

And so if America wanted to put sixteen million soldiers into uniform, it would need China’s help.

And that’s great if China is on the same side.

But what if its not?

Trump's questioning the whole free-trade edifice, and in the process copping the usual criticism from people falling over themselves to label him a racist.

But what I think he’s realised is that the whole-free trade fantasy is based on an idea of enduring global peace.

It’s fine to send all your vital industries overseas, because, hey, they’re our friends, and of course they’ll sell us what we need.

It’s a lovely ideal, but it is a little crazy.

In the early days, the free-trade mission was advanced by trading blocks – groups of like-minded nations who were already closely bound by ideology.

Take Australia and New Zealand for example. There’s no danger in NZ letting us produce dairy and sheep because of course, we would help our cousins out if they needed it.

(Until we hollow out their economy and conquer it in the name of the glorious Malcom. Buwahaha.)

And as nation-level conflict went out of fashion, and local businesses realised there were some sweet profits to be made, the circle of free trade expanded.

But then along comes Trump, who love him or hate him, is less beholden to big business than any President in living memory. And he looks at this, and says, aren’t we making ourselves just the teensy bit vulnerable?

He’s probably looking at this chart here.

And that chart says that the trade deficit with China is freaking massive! Pretty much more than all the other countries combined.

Are Americans ok with that?

Because what it represents is a massive export of wealth. Even if you’re just printing the money, it’s got to become real somewhere, and even if it’s just a claim on wealth, all those claims are currently being sent to China.

How does that end? How does it end well?

But the free-trade ideologues sponsored by the various big business councils would say, hey, no worries. When countries have shared economic interests, peace follows.

But what if China’s economic interest is in eroding America’s economic base and ultimately replacing it as the dominant global force? That’s not such a peaceful scenario, Pollyanna.

But perhaps we shouldn’t be too worried. It’s not like China is amassing a robot army.

Oh no hang on, they are.

Global Stock of Robots

 

This chart says that China has more robots than the rest of Asia combined! Ok sure, those robots are more likely to be car automations than killer-drones, but that’s just the point.

Right now, America is exporting a huge amount of wealth every month, with which, China is building incredible productive capacity.

How does that possibly end well?

That’s what’s keeping Trump up at night.

Such a racist.

Move people, move mountains

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This art touches every aspect of your life

There’s a saying I always love: If you want to achieve great things, you need to give a lot of people what they want.

What I love about it is the mindset it puts me in. If I’m not careful I can find myself slipping into an adversarial mindset. That vendor has a property that I want. How do I get it for absolute minimum he’s going to accept?

Sometimes you need to think that way. The world can be a competitive place.

But our default position has to be win/win. Where ever possible we should be looking for outcomes that give everyone involved what they want.

And when you’re building an empire (or whatever shape that means to you), this is the only sustainable option. The ruthless competitor will end up without any friends soon enough. And from there, they’re powerless.

And so as your empire grows, your sphere of giving expands. You’re able to offer more to more and more people.

In return, they’re able to offer you something as powerful as OPM (other people’s money). And that’s OPE – other people’s energy.

I mean look at what I do. My business is epic. There’s absolutely no way I could do what we do on my own.

I’m only able to achieve great (IMHO) things because I’m able to leverage off other people’s energy.

Of course, paying wages helps here. Money is the joker in cards. It’s not really what you want, but it’s a pretty good substitute.

But really, money only gets you so far. You still need to be tuned into what drives and motivates people.

And when you’re giving people what they want, money only gets you so far.

And so I take that approach to HR. I’m trying to tune in to what my staff’s motivations really are. And they’re all different.

And where ever possible, I’m looking for those win/win outcomes that give them what they want. And so when Reid wants to wear his underpants on the outside on Fridays, I’m like “sure, why not?”

What we’re touching on here is the subtle art of influence. It’s a soft skill, about working with people. It’s about leadership.

And you might be thinking, leadership is something only CEOs need to worry about. But you’re dead wrong.

No matter what you’re trying to achieve in life, at some point you’re going to need to leverage OPE.

It’s even a defensive question. Even if you’re only ambition in life is to sit on the couch and eat Twisties, you’ll still need to wrangle a few negotiations to empower that particular life choice.

And so I’m finding I’m getting more and more questions about this area – because it’s huge, and it touches on every aspect of our productive lives.

And I guess that I’ve learnt a few things about the topic over the years – with my experience in sales, marketing and managing my staff/spouse.

And so I’m feeling inspired to riff on this topic a little more. For some people, it’s going to be directly relevant to the specific challenges they’re facing. For others, it will be more relevant to their entire way of being.

But I think it’s going to be useful.

Because at the end of the day we’re all stuck with the same reality. If you want to move mountains, you’ve got to move people.

So look out for the OPE tagline in future emails/blogs. I’ll be dropping some gems over the coming weeks.

The markets where investors are crapping themselves right now

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Just where is the high-rise glut happening?

Take a look at this chart here. This is the Halloween's Day special:

What it shows is sales of new apartment buildings (the grey bars) and approvals (the orange line). Right now, they're going in totally different directions, with approvals moving higher, and new sales falling off a cliff.

Keep in mind too that the reality is probably worse than this. The sales data only goes up to September last year. Since then, it seems that things have gotten worse.

How do I know that? Intuition. That and the fact that every day we here some crazy stories about developers tripling their sales incentives, throwing in luxury fittings for free, or even offering 5-year settlements!

That last one is interesting. You settle in 5 years, but you have to lease the apartment in the mean time. Effectively, the developer is offering rent-to-own.

So, it definitely doesn't look like the apartment market has bounced back in the new year. Sales have probably maintained their downward trajectory. Especially as the banks black-list some of the worst-affected areas.

And at the same time, we continue to build into the glut. The construction peak seems to have passed, but we're still adding a lot of stock.
And so with sales falling and more supply coming online and in the pipeline, it's very hard to see apartment prices holding ground.

Some areas will obviously be worse hit than others.

The AFR published a list of the ten riskiest suburbs – the suburbs where apartment construction is adding the most supply, relative to existing stock.

The brunt of it looks like it will be borne in NSW and Queensland, but this is a national phenomenon, with Perth and Adelaide CBDs also making the list.

Interestingly, only Southbank in Victoria is in the top ten. Melbourne was home to original high-rise anxiety, but largely it's sorted itself out, thanks to super-charged population growth into Melbourne in recent years.

The guys over at MacroBusiness have given us a more detailed look at this data. I've pulled out the supply coming on line over the next 24 months relative to existing stock, as I think this best captures the risk.

However, some of these suburbs are new and starting from a very low base, so this may overstate things a little.

Anyway, here's the picture for Sydney:

Cranebrook is massive, but really, all of those numbers are. To add 20% to the apartment stock in 24 months, after several years of solid building, is huge.

Over in Melbourne it looks like this:

That's a bit more balanced, but still, we're averaging around 15%. Not quite as cray-cray as Sydney, but still big.

Finally, let's have a quick look at Brisbane:

Holy smokes would you look at Woolloongabba! Epic.

Now this doesn't mean that prices in these areas will necessarily take a hit. For example, the Gabba is close to the city in Brisbane. It's going to be an attractive place to live.

But if there's a lot of supply going up there, then that's going to pull population from other centres.

So the real question is not just where is the most supply being built, but where is the inconveniently located supply? That's where I expect to see prices to fall first, and hardest.

So.. is this a problem for the broader market?

The general view of analysts seems to be, no. This isn't going to be contagious. We're going to see the apartment market struggle for a couple of years, but detached housing should remain isolated.

I'd probably agree.

But man, I'd be watching these markets closely.

And if you're tempted to take the bait of free Smeg appliances or 60-months interest fee, think again.

How to sell the tax cuts… from a guy who knows sales

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The government has a tough job ahead of them. Here's some free advice.

Ok, let me declare a bias here. I'm a wealthy guy. I run a successful business. We pay a butt load of tax.

So, when I say I reckon the government should get the proposed business tax cuts through, you need to know that would put a lot of cash in my pocket.

That's not why I'm saying they should. But I can't pretend it's irrelevant either. From my perspective, I have an objective interest in the truth. But I also know that humans that think they're being objective are kidding themselves.

At some deep level, I'm probably biased. So with that in mind, let me talk about how we can make these tax cuts a reality.

Ok, so, in case you missed it, there's a bit of a campaign gearing up to try and get the proposed business tax cuts through.

You probably did miss it because it's coming at an unfortunate time. The Barnaby Joyce debacle (Barnacle?) is swallowing everything in its path and making everyone in Canberra look like a bunch of hypocritical self-serving clowns. (News-flash!).

That's not the ideal time to be trying to delicately work a major piece of controversial legislature through the houses of parliament.

And Barnaby has a bit of a reputation for getting cosy with the titans of big business, like his special relationship to Gina Reinhardt.

The most challenging visual the government's got to work against is the idea that they're just helping out their mates in business. Having mates in business is not a reason to not do something good for business and good for the country, but people don't expect much from their politicians these days, and definitely not integrity.

And they're probably right.

So I think the tax cuts are a good idea. I generally like to see government's constrained to a tight budget and the public service kept on a strict diet. That's good enough reason in and of itself.

I also think it would be good for business. I personally would have a lot of things I could do if the tax man left a couple of mill extra in my account each year. I'd grow, expand, hire – just generally get on with the business of doing business.

And you can see it in the US. Whatever you think of Trump, you have to admit is tax cuts have lit a fire under the US economy. People are talking about rate hikes being a reality for the first time in ages – the economy is looking that strong.

So I'd like to see them get across the line. But I'm looking at the current state of play and I just can't get all that hopeful that this government is going to get this thing through.

The Turnbull government is not an inspiring government of action.

So you know, I'm in sales. Let me give them some sales advice. How do you sell this thing?

1. Pull in the big corporate mouthpieces
The peak business bodies have taken the offensive and are out lobbying for the tax cuts. It's really hard for this not to come across as self-serving when it puts a lot of money in their pockets. They can talk about ‘good for the country' but no one's going to believe them. And right now, they're on a road-show with Australian politicians in America.

Remember ‘drain the swamp'? One of the key electoral themes right now across the globe is the murky connections between business and government. When big business leaders sit down with Premiers, in flashy American hotels, it doesn't help matters, no matter how much they go on about “jobs and growth.”

2. Rework the wages angle
Morrison's idea that ‘business needs to have money to be able to pay more' isn't great. It's true enough, but not persuasive. I think people know that their wage depends on their own bargaining situation. If their boss has more money, that doesn't necessarily mean they'll be able to get it from them.

If anything, getting people to meditate on this could actually reinforce any felt power imbalances, and frustration with how much power and privilege big business has.

I think I saw someone say that the tax cuts should be tied to wages. I think this is actually a pretty good idea. The proposed tax cuts are rolled in over ten years. Maybe you could receive it all up front, depending on how much you let feed through to wages growth.

I don't know what the formulas would be, but you can bet workers would be more supportive of tax cuts if they knew for certain they'd translate into wages growth.

3. Compete on your vision for the economy
I think the government could go harder on Labor. They went in the right direction last week saying that sure, Labor want to invest in health and education, but that money has to come from somewhere.

I think you need to point out the realities of our economic situation. Right now, the public sector is holding up the rest of the economy. Most jobs growth is happening in the public sector, while the private sector is flailing.

That's just not sustainable.

So they need to spell out a vision for how to get the private economy going again. That probably involves tax cuts but it wouldn't end there. Maybe phase in the tax cuts industry by industry, focusing on the areas that need it most (post-autos manufacturing would be a good start).

Just sell it, you clowns
So that's a start, right? I'm not holding my breath. This government hasn't given us a lot to be hopeful for.

But I think it can be done.

For the good of the country, for jobs and growth. 😉

Why the apartment crash is on hold

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Banks are running a closed shop

I've been warning my readers about the high-rise apartment sector for what… like 3 or 4 years now?

They're still standing… Is it time to admit that I'm wrong?

While I generally agree with the line that being wrong about the timing is the same as being wrong, I'm standing by what I said. In fact, if you followed my advice and steered clear of the high-rise sector in recent years, I expect a thank you card for Christmas.

And if things play out how they look like playing out, I expect you'll want to throw in a top-shelf bottle of whiskey to accompany that card.

So if things are as shaky as I've been saying, why haven't we seen more cracks starting to appear in the high-rise foundations? And apart from blacklisting a few suburbs here and there, why aren't banks back-pedaling harder on their exposure to the sector?

These are good questions. One of the old salty dogs of the Australian economic commentariat, Robert Gottliebsen had a crack at answering them the other day. I think the answers were interesting:

“Nowhere in Australia are there more danger signals than in inner city apartments. Most of the property commentaries look at average dwelling prices in particular cities, not at specific markets.

Broadly one and two bedroom apartments units sold on a “used” basis are down about 20 per cent in the three main markets – Sydney, Melbourne and Brisbane. Melbourne has a very serious problem in this market because a large number of the apartments have explosive high fire-risk cladding that must be replaced, which will either send builders and other industry players to the wall or will be paid for by owners who are risking their own or their tenants' personal safety each day. As this becomes understood the value of these apartments will fall by a lot more than 20 per cent.

Ok, hang on a sec. “Explosive” high fire-risk cladding? I've written about the cladding issue before, but I'm not aware of anyone saying that the cladding had the potential to “explode”. Maybe it was senior moment… Anyway:

Right now there are series of developers and apartment owners that in years gone by would have seen the bank heavies move in and take control.

But the banks are just sitting there watching the crisis unfold. Why? Here are five possible reasons and I give my rating out of 10 for each of the reasons.

Firstly the banks have changed their spots and are going to be soft in the future. Possible accuracy rated out of 10 – nil.

Secondly, the banks are scared about the impact on the total market if they pull the plugs. Rating – nine.

Thirdly, in Melbourne, taking control of fire risk apartments either by appointing receivers to builder/developers or taking control of individual apartments is extremely dangerous for banks. Stay low: Rating – nine

Fourth, the banks are worried about the royal commission and don't want bad headlines at this time. Rating – eight.

Finally, when interest rates are low banks are less likely to be vicious because the cost of allowing money to be frozen while the borrower tries to solve the problems is low. Rating, seven. But this will change if interest rates rise.

At some point the banks will have to confess their problems in this area and my guess is that the combination of higher global interest rates and the royal commission will force those confessions.

Maybe. I suspect to the only way to get the truth out of the banks is to pry it from their cold, dead hands.

However, on the idea that the banks are colluding to prop up a sector and to prevent the entire industry taking a bath… well, we've seen it before and it certainly wouldn't surprise me if that was the case.

I think the banks probably did get a little blind-sided by the king tide in foreign capital – a tide that came in quickly, and is quickly on the way out.

They don't want to be left holding the baby on that one, but they're stuck with it.

A managed unwind is actually probably the best we could hope for.

I think the next 12 months are going to be make-or-break. Developers and early buyers will be looking to off-load stock on a new generation of buyers.

But the only generation of buyers that's going to fall for that – or be dazzled by free i-pads, and interest free furniture packages – is a generation that is probably not going to be particularly savvy.

(They're not going to be readers of my blog, that's for sure.)

That also means that they're probably not going to be in a super-strong financial position. They're more likely to struggle with mortgage payments if the economy stumbles.

That is, the market is trying to hand-ball the baby on to a new bunch of suckers, and those suckers are the most likely to go down, fall hard, and go down en masse.

That wouldn't be fabulous for the economy.

So spread the word. Is grandma thinking of tipping her nest-egg into an off-the-plan apartment in inner-city Brisbane?

Get her to think twice.

NO B.S. FRIDAY: Maybe people are the problem

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Bitcoin is headed for its GFC moment. We probably shouldn’t be surprised.

I generally like to think of myself as an optimist. I’m definitely a glass-half-full kind of guy.

And when I’m looking at the amazing stuff Dymphna’s digging up for her Next 10 event (last chance for tix folks!), generally I get pretty pumped. The future looks like it will be an amazing time to be alive.

But then humanity still gives me things that are face-palm worthy.

And I look at all the technology on offer and I think, it doesn’t really solve our fundamental problem – because our problem is us.

Until they invent technology that stops people being greedy, being idiots, or being both, any technology we come with can only ever be a work-around for our most fundamental problems.

There’s a saying that I’ve always loved and hated in equal measure: “From the crooked timber of humanity, no straight thing was ever made. (Immanuel Kant).

I love it because it captures the dilemma perfectly. I hate it because it’s a bit depressing. And I hate it because part of me believes that it could be true.

So take the theft this week of $US31 million worth of Tether tokens. Yep, some hacker ran off with $31m worth of digital currency.

(Build a better bank, they’ll build a better bank robber).

It first caught my attention because it gave the price of Bitcoin a solid (but temporary) whump, but also for the controversy that followed around Tether’s response.

Effectively, Tether froze the funds and suspended the Tether back-end wallet service.

Sounds reasonable. But enter Cornell professor Emin Gun Sirer:

“Tether quietly did a hard fork to blacklist a specific address and freeze funds. Three questions: 1. Who controls the Omni ledger and who can perform these kinds of operations? 2. Why was this address blacklisted? 3. Which other addresses are next in line?”

So sure, maybe it’s ok to blacklist addresses of bad guys. But who says who is a bad guy and who isn’t?

And this is one of the big tensions with digital currencies. They’re outside the system and unpoliceable, which is great, but they’re also outside the system and unpoliceable, which is not so great.

It depends on whether you like the extra-system results you get.

And in all the hype of the promise of post-state economics, how many people participating in Tether knew that Tether could freeze their accounts on a whim?

I mean, of course, they wouldn’t unless it was absolutely necessary. But that’s what the Gestapo said about wire-tapping.

The thing is though, this story doesn’t stop there.

Tether is an interesting beast. It was founded by one of the child actors in The Mighty Ducks, which is irrelevant but I just can’t get that fact out of my head.

In theory, Tether’s tokens are pegged to the USD. 1USDT = 1USD. They do this to facilitate trade on coin exchanges, so people can trade with each other without having to come back into the conventional money system until they need to.

Very useful. With a market capitalization of about $675 million, tether is the world’s 20th most-valuable virtual currency

However, while we know for sure how many USDTs there are in circulation, we don’t know how much backing they actually have.

Some people have been wondering if they’re fully backed at all.

Some people have been wondering if maybe Tether has actually been running an elaborate ponzi scheme.

“Print” more tokens, sell them at a higher price, use the proceeds to sure up your reserves for previously issued tokens.

What could go wrong?

But not only that, some people wonder if Tether is deliberately manipulating the price of Bitcoin.

This guy reckons if you track the issuance of Tether tokens, it lines up with times that the Bitcoin price was looking shaky.

They’ve got the motive. If the Bitcoin price falls, their ponzi scheme comes apart. So they have a strong interest in keeping the price moving higher.

Now I don’t know how much weight to give any of this. I don’t have a lot of skin in the game, so it’s just an interesting show.

But as I’m reading this, it’s all sounding familiar.

Say that your money is backed by something, when it’s not. Print more to line your own pockets and keep the whole show rolling on. When things go wrong, blame some rouge agents and freeze the funds of ordinary folks.

Sound familiar?

This is exactly the Wall Street business model. This is exactly what gave us the GFC!

*face-palm.

Oh crooked, crooked timber. Can’t you do anything right?

I don’t know. I guess people are good, on balance. The good apples out number the bad.

But given the incredible tech coming down on us (seriously, you’ve got to check out the Next 10 event to get your head around it), even just a handful of bad apples could seriously derail the whole species.

Don’t give a monkey a hand gun. Don’t give a human a quantum computer and the ability to genetically modify viruses.

Oh boy.

What ever happens, we’re in for a hellava ride.

You be the judge. Get along to the Next 10 event this weekend and tell me if we should be worried or not.

NO B.S. FRIDAY: Want Free Money? Hit Up This Guy.

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The people who know are getting ready for ‘post-work’ society.

Do you love free money? Want to know where to get it?

Go and see this guy:

That’s Sam Altman. He’s the president of “prestigious start-up accelerator” Y Combinator.

If that image and that business name don’t scream tech guru I don’t know what does. He’s pretty much a poster-boy for Silicon Valley.

And now, the word is, he’s giving out free money.

Not just willy nilly unfortunately. Basically he’s funding his own UBI experiment.

I’ve covered UBI – Universal Basic Income – before, and it’s one of the main trends Dymphna’s identified for her Next 10 event. If you’re new on the scene, essentially everyone in the country gets income from the government. It’s not means tested. It’s not eligibility-based. It’s just free money.

It’s an idea that just 20 years ago seemed plain nuts, but now it’s one of the hottest topics in town.

Especially Silicon Valley town.

Should we be worried that Silicon Valley is all hot under the collar for UBI? Yes. Yes we should.

Why? Because these are the guys who probably have the best idea about the jobs carnage that’s coming.

They’re the ones who are making the robots that are going to put more than half of us out of a job.

And we’ve always had churn before. Horse and buggy drivers became cabbies became Uber drivers.

It’s just that now, things are getting exponential. Technology is expanding and improving at such a wild pace that we have no hope of keeping up with it.

And technology used to be labour-augmenting – the way a calculator helped an accountant do their job. Now it’s labour-replacing. You don’t need the accountant any more. There’s an app for that.

These two things combined mean that we’re potentially on the cusp of a jobs Armageddon. Jobs will be destroyed faster than the economy can create them.

The geniuses at Silicon Valley recognise this. They also recognise that if no one has a job, no one will buy their gadgets.

The solution? The government gives everyone money.

Ok, maybe I’m being a little cynical there.

The more idealistic proponents of UBI say that in a world with no work, we’re going to have to come up with some sort of system that enables people to live.

And in a world staring down the abyss of deflation (again, thanks technology. Way to make everything cheaper), then we can afford to do it.

The US was printing $80bn a month at some point there. Barely moved the dial on inflation. No reason why we can’t just give everyone enough to cover the basics.

And people can still work if they want to. If they want super nice things, they can earn the money to buy them.

That’s the basics of UBI, and we’ve seen a number of trials rolled out in different places, Finland, some part of Canada.

But what I find interesting here is that this is a private initiative. This isn’t some government backed pilot study. This is just some rich dude putting up his hand to run a trial.

Business Insider was running the story:

“Y Combinator, the largest and most prestigious startup accelerator in Silicon Valley, has announced new details of its upcoming experiment to give Americans free money.

YC will select 3,000 people across two states and divide them into two groups. The first group will include 1,000 people who will receive $US1,000 a month for up to five years. The second group of 2,000 people — which the study will consider its control group — will receive $US50 a month.

YC President Sam Altman announced on the company’s blog that he was interested in answering that question with a study of “universal basic income.”

Many of Altman’s techie peers have endorsed or expressed interest in UBI as a potential solution to the widespread automation of jobs that economists say the coming decades will bring.

Proponents also say UBI could lift people from poverty and raise the collective standard of living for everyone, generating greater prosperity. Sceptics, meanwhile, argue that UBI will sap people of their motivation to work if they already have money coming in.

There haven’t been any long-term studies to say either way, however. YC’s study will be one of the largest experiments in US history and should provide data never before seen in a developed country.

The new study will test a variety of factors to gauge UBI’s effectiveness, including “individuals’ time use and finances, indicators of mental and physical health, and effects on children and social networks,” the company wrote on its blog. The most important outcomes to watch will be whether people keep working and feel engaged in their communities, and whether the maths could work out to deliver UBI at all.

Kind of what I love about this story is that this is how the real world works.

In politics, you argue for a long time about the theory of an idea, and then you roll it out across the country.

Businesses that operated like this would never last long.

In business, you run small-scale trials. You develop a prototype. You test it out on a trial market. You refine the idea, you trial it again. Eventually, after enough iterations, you end up with an idea that works.

That’s what we’re seeing here. We’re seeing a small-scale trial – as a way to test the waters and see what works.

More public policy should be run this way.

And the results are going to be interesting. What happens when people don’t have to work for a living?

My bet is that people start doing things that are really meaningful. Sure, there’s probably a phase we’re people stay home and masturbate into a packet of Cheesles. But that gets old pretty quickly.

Soon enough, people will start to wonder how they can fill their days with meaning.

That’s my bet. Let’s see what happens.

Technology isn’t just shaping business. It’s promising to turn society on its head. Get along to Dymphna Boholt’s Next 10 event to get the full picture on where we’re going. It’s mind-blowing.

NO B.S. FRIDAY: Identity Theft Politics

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Just how much the world has changed…

So New Zealand has a new Prime Minister.

Jacinda Ardern is 37 years of age. She’s eloquent and she’s photogenic.

Now I know next to nothing about New Zealand politics, and I know even less about Ardern, but when I saw the news it felt totally unsurprising.

To me, she looks like exactly the kind of candidate the progressive left is throwing into elections these days.

I mean, take a look at Ardern, alongside Canadian Prime Minister Justin Tredeau and French Prime Minster Emanuel Marco:

Am I the only to notice that the Left is using the same casting agency as the hit comedy show ‘Friends’?

 

Politics, as always, is about branding. If you don’t believe that – if you think politics is about conviction and values and policies (lol), you’re probably wasting your time on my blog. You can go back to reading the newspapers.

So politics is about branding, but have you noticed that the branding has changed? I think this says a bit about where the world is at and where we’re heading.

I mean, go back to the eighties and Hawk vs. Fraser. By modern standards, they’re hard to separate. They look like they belong in the same party.

But at the time, the represented different worlds. Hawk, coming straight out of the ACTU, and holding some sort of record for skulling beer at Oxford, was practically a working-class hero. Fraser represented enlightened new-world economics.

And neither of them were particularly sexy.

Now times have changed. The right is still throwing up characters like Tony Abbott, (though I guess you could say that they flirted with sexy with Malcolm Turnbull – but it was a very safe and boring form of sexy.)

The left on the other hand is turning away from working-class credentials. It’s no longer simply enough to have spent time in the mines. You need to have been an online campaigner for transgender refugee seals in the arctic circle.

Look at Ardern, Trudeau and Marcon – put them in sneakers and they’d look like Silicon Valley execs on their way to a quinoa salad meeting with venture capitalists. And implicitly, they speak for every oppressed minority under the sun.

And in a profound visual way they stand in direct opposition to the old guard of old white-male politics. Trump for example.

I mean, have a look at Trudeau’s photo on his official web page:

How is the imagery here? Looking down on his full and lustrous head of hair, striding up stairs (onwards and upwards), the gold of his wedding ring against the firm gold of the bannister speaking to family values, his face partially hidden, evoking mystique…

(This guy is working with pros.)

He is the embodiment of youth and progress.

Unlike Trump.

But take another look at that photo. Does anything there speak to working-class credentials?

Nope, literally nothing. There is nothing that says that Trudeau knows what it’s like to pack boxes or dig holes. He’s not watching football, motorsports or professional wrestling. He’s not willing to settle arguments with his fists. He’s not telling off-colour jokes in the locker-room with the fellahs after work…

Unlike Trump.

And the left still wonders how Trump won over the working class… How he beat a candidate that was qualified sure enough, but whose central planks included the fact that she was a woman and it was about time the US had a female President.

(That only works if you identify with that sort of branding… and a lot of people didn’t.)

So this is the strange state of politics today. There is a perception that the left has abandoned its working-class roots in favour of identity politics – being the hero of every underdog from homeless women, to refugees, to transgender seals.

But the way I see it, identity politics isn’t anything new. Hawk spoke to a working-class identity.

It’s just that the intellectual left went out on their own journey with respect to what identity they were talking to. And it was a noble journey of sorts. They recognised that oppression (and the exercise of power and privilege) was the true evil. It had many manifestations – there is worker exploitation, but there is also racism, sexism, bigotry, sealism etc.)

You could only destroy these things if you destroyed the very concept of oppression. Either through shame or through force, you had to destroy people’s ability to exercise power and privilege…

… you had to fight the evil at its source.

All very noble. And I think I agree. The only thing that happened though is that working-class people (if anyone even identifies with that term anymore) found themselves recast from oppressed to oppressor. They were the ones who were keeping women out of the workforce, or stopping poor people in Asia from getting a job by opposing the opening of trade barriers.

(And in walked Trump.)

At the same time, it became a badge of pride within the left to have conquered the central evil – to be checking your privilege and to be celebrating diversity in all its forms.

And now, the left’s leaders need to embody this. They need to physically represent the victory over the great evil. Arden, Trudeau and Marcon are the poster children for a future where there is no oppression.

It sells and it sells well. Within their base they are incredibly popular.

So,

FUTURE PREDICTION 1: This dynamic will effectively create positive discrimination in the left’s pre-selection process – expect to see more candidates from diverse backgrounds.

FUTURE PREDICTION 2: Jenny Wong will soon become leader of the Labor party, possibly Prime Minister.

Look, all of this is probably a good thing. I look forward to a world where all oppression has been banished from the Earth.

But a word of warning to the Left: That can only happen if you take everyone on the journey with you. If you keep forgetting yesterday’s oppressed, then they’ll be picked up by your opponents, and round and round we go.

I know the visuals of sexy young techno-hipsters sells well, but it’s only going to get you so far.

What do you make of Ardern’s victory? What's your future prediction (drop it below – let's see how crazy this gets!)

The boom-driver baton now goes to…

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Investors are sidelined. Who’s going to step into the breach?

It’s a tough credit environment at the moment.

I’ve seen tougher, but then I’ve been around for a long time. If you’re new to the game, you might be wondering what’s going on.

Two years ago, banks were falling over themselves to throw money at you. Now, they don’t want to know you.

People are a little freaked that this is going to cause the market to ‘collapse’, but I think this misses the point.

The credit restrictions, introduced into the system via APRA, are deliberate friction. They’re sand in the gears of the market.

But the market fundamentals haven’t changed. People want to borrow, banks want to lend.

And once the sand has worked through the system, those fundamentals will reassert themselves. We’ll pick up where we left off. Maybe with cooler heads perhaps, and that will be a good thing.

The other point I’d make is that so far, it seems that the restrictions are squarely aimed at investors.

Investors are getting the “It’s not you, it’s me” talk from their banks, and then going out the next day to see their bank walking hand in hand with some floozy owner-occupier.

“I really thought he could change!”

And it’s one of the hidden stories in all of this. While investor lending is slowing, first-home owner lending is actually booming.

In NSW, first home buyer finance commitments are up 80% year on year!

While in Victoria, FHB finance is up an also-thumping 45% year on year.

These are some seriously huge numbers.

(Of course you don’t hear APRA stressing about the irrational surge in first home buying – even though the data shows that FHBs tend to be in much more precarious financial situations than investors… but that’s another story.)

The point is, that while investor lending is slowing, owner-occupier lending, particularly to first home buyers, is picking up the slack.

In part, I think this has got a bit to do with simply how the data are recorded.

I mean, we know for example that in recent times, many first home buyers have entered the market, not with a house for themselves, but with an investment property.

Some data showed that in Sydney, for every first-time buyer, there was a first time investor.

So you can bet that these first home investors no longer have any incentive to label themselves as investors – not with APRA gunning for investors.

They’re going to come back across the line and say, actually, we’re owner-occupiers.

(And who knows what the actual truth is.)

So some of the boom in first home buying may just be column jumping.

But I’m willing to bet that a good chunk of it is real. Remember that we’ve had some pretty heft first home buyer bribes in NSW and Victoria come into effect this year.

In Victoria, they scrapped stamp duties on properties up to $600K.

And then this week, the Federal government introduced legislation that allows first home buyers to dip into their super. From the SBS:

The coalition used its numbers in parliament’s lower house to pass the measure – announced in the May budget – on Wednesday.

The legislation also allows older Australians to contribute the proceeds of the sale of their family home to their super.

Labor and the Greens are against the proposal, with the opposition claiming it will do nothing to address housing affordability.

Shadow treasurer Chris Bowen argues it will instead work to undermine the country’s superannuation system, labelling it a “sham”.

Assistant minister to the treasurer, Michael Sukkar, accused Labor of deliberately peddling misconceptions about the scheme…

“It’s quite shocking and surprising to see any political party take a view that a tax cut for first home buyers is something that they cannot support,” Mr Sukkar said.

I don’t imagine this is going to be huge. But add it to the bribes in Victoria and New South Wales, and it’s adding up to something substantial.

First home buyers are now a force to be reckoned with.

And as people wait for this energizer boom (it just keeps going and going) to run out of puff, the baton has passed from investors to first home buyers.

(For now. Investors will be back.)

If there’s a strategy here, it may be to look at entry-level properties. That will be the first market segment where these grants will be felt.

But money into the system is money into the system – regardless of where it lands. People selling out of entry-level properties buy into the tier above.

A rising tide lifts all boats.

The Australian property market is a beast with more than one engine. Back one off and another takes up the slack. That is how it seems to work.

Seen it before, see it again.

Noticing any impact in the entry-level segment?