Saturday, March 11, 2006

Richard Inder: When Sam Morgan met some of those southern men

Imagine a meeting between Trade Me's Sam Morgan and a pack - perhaps herd is the more appropriate adjective - of southern men, the type brought to the small screen as the laconic beer-swilling Speight's beer shepherds or Mainland cheesemakers.

Now, I have never met Morgan, but I am sure the soon-to-be multi-millionaire would, in the first instance, delight in their characters, just as most people delight in the advertisements.

Their wilful disregard for rules and regulation, their resourcefulness and their relative comfort with discomfort (a campfire under the stars, fly fishing thigh-deep in a fast-moving braided southern river, horseback sheep mustering).

The old codgers at least would enjoy Morgan's inventiveness - his creation of a $700 million business virtually out of thin air. They would also enjoy his inspiration for the business - his inability in the late 90s to find a website where he could buy a secondhand heater.

They would probably share a few beers (probably Speight's) and laugh at each others' quirks. But I bet conversation would pretty quickly grind to a halt.

The southern men would soon find Morgan's passion for mountain-biking bizarre; his $227 million bank balance inconceivable and the inevitable trappings of wealth - a titanium-alloy bike, Icebreaker and Ground Effect outdoor gear, and winter sun in Fiji or further afield - wasteful.

Indeed, if Morgan wears lycra as part of his mountain-biking kit, the Speight's men would be sure to regard it as evidence of an alternative and dubious sexual lifestyle.

Morgan, meanwhile, would quickly find them to be misogynistic, narrow-minded, insular, reactionary, anti-development and possibly racist.

I'm for Morgan. He represents the qualities New Zealand business should aspire to: fresh, innovative thinking and an ability and willingness to take a risk and to keep investing.

But the fact that two of the country's largest mass-market branding campaigns are eulogies to the icon of the southern man suggests many people do not share that view.

The flip-side of what the creative brains behind these campaigns call "country cunning" may often be the very attitudes that hold us back.

Paul Glass, principal of activist fund manager Brook Asset Management, this week warned of the very real risk that New Zealand's sharemarket could be decimated over the coming few years. Our dependence on foreign, and more particularly Australian, capital may make us a branch economy of our transtasman neighbour.

Most people would dismiss Glass' warning. The Speight's shepherds would regard men like Glass as useful as "tits on a bull"; a money man who creates nothing but gets paid huge sums for it; "that property developer bloke" the Mainland cheesemakers mock as they stare out across a pristine Central Otago landscape.

The sharemarket they see as a gamblers' den, where the odds are tipped firmly in favour of the wide-boys, the white-shoe brigade and against the good old up-front straight-shooting salt-of-the-earth Kiwi bloke. So what if the sharemarket withers away to nothing? New Zealand would be the better for it.

And with that they buy another rental property or invest another $100,000 in unsecured first-ranking debenture marshmallows.

They are, of course, mistaken.

If big companies see no future here, if New Zealand's weak savings culture leaves local companies vulnerable to a takeover, if the preponderance of foreigners on local share registers forces companies to emigrate, the country will be a poorer place.

This week's sale of Trade Me to Australian newspaper publisher John Fairfax illustrates Glass' point. The natural partner of Trade Me was a newspaper publisher.

It can afford to pay the most, as the website will insulate it from the continual drift of classified advertising - which represent about half a newspaper's revenue - from paper to the web.

There were no suitable local candidates to make a play. The only rival to Fairfax is APN, publisher of the New Zealand Herald, but it too is Australian owned.

Morgan and his fellow shareholders have a pretty sum to deploy elsewhere in the economy. But profits earned by the business are now in the hands of people who will make their investment decisions from an Australian perspective.

Morgan funded the development of Trade Me privately. But he did so in an environment in part subsidised by the New Zealand sharemarket. His father, Gareth, is after all an economist and runs his own wealth management business. Sam learned his trade at one of the big accountancy firms.

Robust and vibrant capital markets offer the opportunity of big gains (as well as losses) and, as a result, create a culture where fresh thinking, risk taking and innovation earn decent rewards. These are the conditions that will help foster the next Sam Morgan and will secure the wealth of the nation. They should be a priority.


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