Population growth.

March 31st, 2007 by De Onion

Wensleydale made a comment that raised some good points and I think a response belongs on the front page.

– I think that the Bermuda Government’s research may be correct, but in terms of actual population growth we have choices.
– Continue to ad-hoc raise population
– Choose some other path of growth
In terms of beginning with the end in mind the second is clearly the better of the two, although elected governments tend to be incompetent when it comes to effective complex policymaking and being proactive. Net result is that I think that these population projections are garbage, and that construction/real estate is not a bad industry to get into as a result.

…more to come

April Fools

March 31st, 2007 by De Onion

I really hope that the rumor I heard yesterday about the banning of second hand cars and trucks is a bad April Fool’s joke. If it’s true then I have plenty to say about it, but as long as it’s unconfirmed I can only think that someone has been listening to Michael Bloomberg, who said:

“Make the customer think he’s getting laid when he’s really getting fucked.

House passes Economic Disempowerment Zone Bill

March 27th, 2007 by De Onion

An Economic Disempowerment Zone bill promised in the Progressive Labour Party’s 2005 Throne Speech was passed in the House of Assembly late last night.

Designed to provide Bermuda’s businesses located in areas outside of North Hamilton with economic disadvantages and higher taxes, the bill’s introduction in the House spurred a marathon debate, not because the two sides disagreed, but because both parties wanted to claim the landmark legislation as their own.

Members of the House very nearly pulled hamstrings in their rush to rise from their seats and offer comments.

Opposition MP Grant Gibbons said at one point: “Everyone’s trying to claim this baby one way or the other.”

The bill amends an existing law called the Industrial Development Act 1968. The new measure will be called the Economic Disempowerment Act 2007.

The just passed Amendment applies provisions to charge Customs Duty, higher Payroll tax, and strict immigration laws on businesses outside of North Hamilton. The exact provisions will be voted on later by both the House and the Senate.

Just putting this article in perspective. If this zone is successful then the only outcome will be good old-fashioned gentrification displacing all the current residents… who then have to move to low-cost Government housing. Net result is that government housing initiatives serve to effectively subsidize the real estate developers and businesses who grab the value of the high-density real estate.

My young apprentice…

March 26th, 2007 by De Onion

I hate to comment on current news, if this article is correct (and the Gazette gets things wrong on a fairly regular basis, too many articles not enough time) then the proposed 1:1 apprentice to expat ratio is really really bad policy.

Where do we get 928 apprentices from? Do contractors need to start hiring school kids? Do they need to give students a $500 drop out of school bonus to become apprentice carpenters?

Has the effect been considered on the cost of construction? This appears to be a barrier to entry which will make it more difficult for firms to enter the market, raising profit margins for existing large contractors and in turn makes housing more expensive and everyone who buys housing worse off. Of course, I don’t think that this is the intended result, that’d look too much like certain party members trying to line their pockets at our expense.

The Bermuda Government needs to get over the idea that expats are taking jobs away from Bermudians and preventing Bermudians from rising in pay and skill. It’s NOT TRUE.

The real problem is twofold:
1. Low-end wages aren’t rising fast enough because individual firms and employees don’t have the ability to pay/demand higher wages (because our immigration system is arbitrary and does not properly reflect market demand as measured through equilibrium price for labour in a closed market).
2. Half the construction workers are good professionals who do their job (and as I said above, probably don’t get paid what they could), and the other half – the half who are struggling – are people with serious other issues such as drug addiction, chronic absenteeism, alcoholism, health problems, crappy attitude, unwillingness to learn, etc.

So please, stop with the top-down solutions that make it more difficult to do business in Bermuda. The easier it is to do business and the more we maximize wages the better off we’ll be. Please.

Principle centred policy?

March 25th, 2007 by De Onion

I am a big fan of the 7 Habits of Highly Effective People and so I think it’s worth making a post on my view of the ends we should have in mind with Bermuda (Habit #2: Begin with the end in mind.) So often we’re getting bogged down in individual issues that we’re not stepping back and looking at the big picture and long-term reality.

I got thinking after going running with a friend who does business in Bermuda and Hong Kong and hearing his comments and praise for Bermuda. He seemed especially keen that thus far we had created a good place to do business, without losing our essence as a small place – unlike Hong Kong. He lamented that it would be a shame to lose our unique style with growth. Since then I’ve been pondering how we can really manage to grow in the long run.

I think our aim should be to minimize population and maximize per-capita income and wealth while ensuring that the bottom 3% of the population can have a hope of raising children who can make it into the top 98% if they have the talent.

So what are the principles we should be aiming for?
– High social mobility – If you’re an educated adult in Bermuda then there is virtually no limit other than your own talents, that’s the good news. The bad news is that because of our failing public school system and often very negative culture, it’s not possible for a large segment of the population to aspire to high-achievement. That’s a Very Bad Thing.
– Beauty – We should make sure that Bermuda is and continues to be the most beautiful place possible. That means protecting our unique cliffs by destroying Brazilian peppers, being very picky about the style and type of buildings we erect (Southlands), minimizing litter (KBB culture), adopting some building principles that will allow us to create beautiful St. Georges style towns in high density areas (see: Urban Village)
– Accountable government – every person employed by the government is another person who cannot be producing wealth for Bermuda and Bermudians in the private sector. Not only that, but every dollar spent by government is a dollar that can’t be used in the Bermuda private sector to raise standards of living or expand the economy. Also, everything owned by the government should be accounted for correctly as every square foot of space owned by government could otherwise be used to house productive businesses. I’m not saying that we should eliminate government necessarily, but we should know exactly what these services are costing us as taxpayers (football and cricket cost every resident of Bermuda $400, for example. (If you had to write that cheque, would you?)
– Bermudian ownership – we need to make sure that Bermuda’s assets remain in the hands of Bermudians. If Bermudians own the assets (land, businesses, etc) then we get the major benefit of them and have the last straw. Not only that, but through our Private Pension system and other savings we should aspire to own as much of the outside world as possible. Because asset returns compound and we have no significant capital gains or estate taxes we as a people can end up owning far more wealth than Bermuda itself could ever provide. Over time wealth compounds if it is not spent, so Bermuda has the potential to become independently wealthy as a nation (passive income exceeding current living expenses). I’ll do the math on this one in another post at some point.
– Immigration – create some sort of immigration market, avoid policymaking by people who don’t understand economics. Not only that, but since we are ALL the children of immigrants (be it our parents or our great-great-great-great-great-great-great-great-great-grandparents), we should probably look at ways of allowing long-term residents who have truly integrated into Bermuda and become dedicated to the island to participate fully as citizens.

Half-baked I know, but something I wanted to get out on the table.

The end of oil… er… tourism…

March 22nd, 2007 by De Onion

Dubai – a former oil emirate that is intentionally diversifying its economy beyond oil in anticipation of the cessation of production in 2010 – which would have left the state in essential poverty.

One of many very interesting articles from Wharton.

If you read the article – you’ll see how the “CEO of Dubai” and government had the foresight to create a first class jurisdiction in an otherwise empty desert. The relevance for Bermuda is very much the same, although our own ascension has been far slower and less purposeful (it would be a crime to deny the hard work of many people with vision in producing today’s Bermuda economy). Nonetheless, I think there are some huge lessons for all of us – the largest of all being that we can stop wasting Bermuda’s time, resources, land, and people on tourism where we will have to try and compete with third world countries with third world prices and instead use our limited resources to maximize our niche where no less nimble and advanced country can compete in a 21st century economy.

A taste of the third world…

March 22nd, 2007 by De Onion

I have to confess: I thought up that title while lying on my bathroom floor while in the grips of the first stage of food poisoning or something like it. Perhaps the first signs of a blogging addiction.

Food poisoning like seasickness is a two stage process that takes anywhere from a few minutes to a few hours to play its course:
1. You’re afraid that you’re going to die.
2. You’re afraid that you might not.

This little bout is a reminder that even if we live in the richest country in the world by some measures, we still occasionally get hints of the third world that our government seems so keen to partner with. In this case it was “frozen” chicken that had been allowed to thaw in the display freezer. I know this because I immediately returned one of the packages when I found it was thawed and exchanged it for another. The worst part is that the woman at the checkout took the one I had returned and put it back in the freezer to be sold later. Odds are there’s a fellow shopper out there who can feel my pain.

Taken for a sinker…

March 20th, 2007 by De Onion

So the government intends to encourage (subsidize) longlining , a fishing practice where long lines are released with baited hooks, let to sit overnight, and then reeled in later. Let’s ignore the environmental issues resulting from long-lining (near extinction of swordfish, albatross, leatherback turtles, certain sharks, etc.)

I really wonder about the economics of it. I don’t see how a business that is dying in the United States and Canada can ever make it in Bermuda without substantial subsidy such that every single person in Bermuda is worse off as a result except for the people who are working on the boats. The economics as far as I can see just don’t work when you compare longlining to virtually any other business in Bermuda. This article states that the captain makes NZ$100,000 (BM$70,000) per year and the deck hands NZ$40,000 (BM$28,000) per year. Does anyone think that Bermudians will work for $28,000 per year? Or are we going to have to all take out of our pockets to make these fishing businesses profitable?

Clearly this is speculation on my part – I have no idea what the financials would be on the boats that are coming here, but my gut tells me it’s unlikely they’ll be able to compete with other local businesses for staff and resources without plenty of government help that we will all pay for.

Comments…

March 19th, 2007 by De Onion

Thank you for the comments, I apologize for not responding – some are worth having their own post/thread to discuss in more detail.

Thanks also to politics.bm for the link – the traffic upswing has been pretty impressive.

Most of all, thanks for reading.

De Onion

American Idle

March 16th, 2007 by De Onion

im·ply (ĭm-plī’) Pronunciation Key
tr.v. im·plied, im·ply·ing, im·plies

1. To involve by logical necessity; entail: Life implies growth and death.
2. To express or indicate indirectly: His tone implied disapproval. See Synonyms at suggest. See Usage Note at infer.

I am often accused of being “dedicated”, “motivated”, “focused”, “disciplined” and a whole slew of other things as a result of my focus on explicit goals, especially relating to training for and running May 24. To many it seems that to be able to spend several hours per week focused on a seemingly superhuman goal requires some magical mix of personality attributes possessed by few and certainly beyond the reach of most. The reality is that most of us in the world are as focused on our implicit goals – ie. the goals that are implied by the way we spend our time, energy, and effort on a daily basis. The single largest implied goal in many people’s lives is to become a very very good television watcher.

Why good? There has been enough research to make it clear that while our ultimate potential in any given area, be it chess, long distance running, cricket, beer drinking, accounting, parenting, loving, or almost anything else is defined by talent. However, how good we actually become is far more a function of how much time we spend continually working beyond our present level of ability. What this means is that simply by focusing on the actions that are required to improve we can in the long run achieve goals that are too big to even imagine at the start.

How do you eat an elephant? Simple, one bite at a time.

Where do implied goals come in? Simple, every time we sit down and turn on the television that implies that you want to become a better TV watcher. Not exactly something at which we can build a high level skill? Think again, research in young children has shown that even small amounts of TV watching can over the long run influence the brain and raise the internal levels of stimulation necessary to maintain focus and attention. While at this point I’m only aware of research showing this effect in children I suspect that it follows through into adulthood and our fascination with the bright lights and fast moving sounds of TV may make us less able to focus our time on things that matter and instead focus on that old implied goal of becoming great consumers of TV.