Saturday, March 11, 2006

Editorial: Classic clash of town and rural values

The police are standing by their decision to charge South Taranaki farmer Gavin Vanner with manslaughter after his daughter Molly was killed riding his quad bike. The outcome of the trial provides reason to question their position, however.

First, there is the speed with which a High Court jury cleared Mr Vanner of that charge, and an alternative one of criminal nuisance. Then there is the correctness of the jury's verdict. As much as Mr Vanner's judgment may be queried, it is a long leap from there to finding an element of criminality in his conduct.

The verdict was, in fact, predictable. As much as a jury should not, strictly speaking, view grief as an issue for consideration, the further punishment of a distraught father was bound to seem a futile exercise. Able defence lawyers would always cast matters in a light that overshadowed issues of conduct. This promoted the right outcome, even if not for the right reason.

All the while, the prolonged proceedings increased bitterness towards the police in the Kakaramea community. Even acquittal will do little to salve that sentiment. In a classic instance of townie values confronting common rural practice, the police were seen as siding with ACC and the Department of Labour, both much scorned in the farming community.

The verdict also created a precedent. Farmers, it seems, need not fear prosecution for similar conduct in future. Some may even interpret the outcome as upholding their values, no matter, as Justice Rodney Hansen noted, the "yawning gulf" between what any safety expert would say and they do.

Such farmers would be better advised to ponder the wisdom of allowing young children to ride quad bikes. These are not harmless pieces of light machinery. The one that rolled on top of 4-year-old Molly Vanner weighed 368kg. It is hard to imagine a young child handling such a machine with the required degree of safety. ACC statistics confirm as much. It receives about 50 claims a year for children involved in quad bike accidents.

Federated Farmers has tried to get its members to think about the dangers. In 2003, in association with ACC and the Department of Labour, it released industry guidelines for the use of quad bikes. These suggested no one under 15 should be allowed to ride them, and that helmets and protective clothing should be worn. They are not, however, a legal requirement, and have been disregarded by many farmers.

That, in itself, illustrates the chasm in thinking between town and country. Urban employers must abide by strict safety standards, while many farmers pay cursory attention to the subject. Adherence to traditional practices, and a fear of losing perceived freedoms, mean they will accept change only with the greatest reluctance. When an attempt is made to impose urban standards on those practices, as would have been the implication of a successful prosecution, there is bound to be friction. And a jury sitting in New Plymouth is rather more likely to acquit than one sitting in Auckland.

But Mr Vanner's lawyer was wrong to claim the case had been pointless. The police, on reflection, might conclude that comment on Molly Vanner's death might have been most appropriately delivered in the context of a coroner's inquest. Criticism of farm practices could have been made without the rancour associated with criminal charges.

And farmers should reflect on what was a needless death. The more responsible already follow industry guidelines. The rest might now ponder whether the dangers associated with modern machinery require a modern approach to safety.

Fran O'Sullivan: Patience wearing thin over 'imperfect data'

In an age where a 30 year old can make $227 million by selling his thriving Trade Me internet operation it's hard to believe the Government just can't get the right software installed quickly enough so it knows how many operations are being performed in the nation's public hospitals.

That's the shocking reality of New Zealand's Third World trending public health system.

We should not allow newbie Health Minister Pete Hodgson to use the excuse of "imperfect data" so lightly to palm off figures which show that despite bumping up budgets by 25 per cent the country's hospitals are doing less "elective" surgery.

Hodgson says the figures (which have been exhaustively mined by National's Health spokesman Tony Ryall) do not include all the outpatient operations that are taking place, but are not recorded because people were not admitted overnight to hospitals. It is taking time to change software and Hodgson does not expect to have full statistics for a year!

This is frightening stuff.

But not surprising I would suggest to people - like myself - who have been through the mill at Auckland City Hospital which Ryall has pinpointed as one of the prime offenders.

The Herald last year exposed the shocking waiting list predicament at what is billed as the country's premier hospital: More than half those needing heart bypass surgery had to wait for more than six months; others couldn't get to see a specialist in the first place. Others needing so-called "elective surgery" - such as hip or knee replacements and those needing gall bladders out - were not put on active review in the first place.

I've heard plenty of horror stories from friends and acquaintances over their own scuffling with the Auckland City Hospital managerial madmen.

Privacy laws prevent me from exposing their tales - so I'll use my own as illustration.

Like others I had believed the Auckland City Hospital specialist who told me "there is nothing to worry about at this stage" after an ultrasound scan revealed I had a bunch of small gallstones rattling around inside me in late 2003.

But I've yet to get an adequate explanation of the Third World circus act that followed: Within months that little bunch was playing such a wild hockey match that I was having to be repeatedly admitted overnight to hospital emergency departments every three weeks or so for intravenous morphine to kill the pain.

Coupled with the Class A drugs that I was taking, like pethidine, and other heavy-duty painkillers, like Tramel, it wasn't long before I was one very sick puppy.

My doctors' letters failed to get me back in front of the specialist.

As I became more drugged out I lost the perspective and will to do the obvious - fight my own corner assiduously or check myself into a private hospital.

By the time it reached crisis point - physical collapse while gardening over Auckland Anniversary Weekend in 2005 - I could hardly stand.

The Hospital Emergency department ordered a cat scan thinking I had injured my spleen. The scan revealed an operation was needed to get the suppurating gall bladder out.

But the next day, 20 minutes before I was due to go to theatre, the surgeons informed me they had been instructed by management not to do the operation: despite being admitted by the emergency department the operation itself was deemed to be "elective surgery" and the budget for gall bladder operations had been capped.

Thankfully the surgeons told management that they would have to sign me out themselves - it was against their ethics to refuse to operate on an acutely ill patient.

The operation was ultimately fitted in late that evening by a kind surgical team and, according to hospital gossip, the offending organ duly delivered to management's desk the next day with a theatrical flourish.

But the madness did not end there.

Just weeks later I was asked to present myself to the hospital specialist for what I thought was a post-operative consultation.

No so. The specialist said I was there to be assessed to see if the gall bladder needed to go.

The hospital's information system was so slack that left obviously didn't inform right about what it was doing.

But that was March 2005. A year on Hodgson is still asking New Zealanders to be patient while the software situation and the "imperfect data" is sorted out.

This is a nonsense.

It may lead to more people - like myself - being pinpointed earlier as surgical candidates.

But the chances of getting an operation in the first place is reduced when people like Auckland District Health Board chairman Wayne Brown - who presides over the city's hospital - demand management cut operating numbers so the board can wipe the fiscal deficit it incurred when the new hospital was constructed.

Despite Hodgson's claims the figures do not lie.

If anything they are understated by the type of Enron-style trickery which would get a hospital manager up on fraud charges if they were applied to financial results.

The real fraud - which Ryall is yet to plumb - is the way the surgical booking list is formed. Patients go into categories like active review, booked, given certainty, residual and rebooked. It's a bit like a revolving door where a patient can be spun off the list at any time.

The problem is not going to disappear.

Hodgson can either take a leaf from National leader Don Brash's books and do a one-off bailout of the system; inject enough cash and contract private hospitals to help get rid of the list over a three year period, or tell New Zealanders the truth - that they can not be assured of an elective surgical procedure unless they have private insurance

Note: In a recent column I made a disparaging remark about Doug Myers' failure to deliver his Business Roundtable retreat speech in person. Myers was laid up (in private hospital) after an accident. My apologies.

John Roughan: Timely re-jig for harbour

Before Auckland's urban designers adopt any "visions" for the western waterfront I'd like to take them to lunch.

I have in mind a sandwich on a sunny day, sitting on the benches between the ferry building and Princes Wharf. We'd need to get there early because all the seats are quickly taken on a fine day and we'd probably have to sit on the barnacle-encrusted steps that go down to the water, as people do.

I'd like us to say nothing for a while, just sit and chew and ruminate on what attracts people to this stretch of the waterfront. It is not just the water, which is oily there, and certainly not because of the public amenities which are minimal.

It's not the peace and quiet because the place is quite busy. The gulf ferries come and go, there is sometimes a cruise ship at Princes Wharf, always craft of some kind puttering about.

Sitting there, munching in the sun, surely the penny would drop. The secret of a successful city waterfront is not so much the public space provided, as the commercial activity nearby.

All week we've been reading of ideas for the redevelopment of the waterfront from the Viaduct to Westhaven, including the removal of the tank farm and using that commanding site for a building of Sydney Opera House significance.

I haven't heard a more exciting subject for a long time. Auckland could erect something there that would define the place, dominate the harbour and swell the hearts of its citizens forever. Sydney has done that so well that anything we do might look imitative, but give us time.

The iconic building is literally the last thing we should do. That is to say, we should do it, but not until somebody comes up with the idea that is so good, so right and natural for that location that we'll all wonder why we didn't think of it.

We'll know it when it happens. In the meantime the City Council urgently needs to do some land use planning for that section of the waterfront, and this time it needs to get it right.

The Auckland central business district is ripe for re-alignment out of the Queen St valley. The Viaduct has already pulled a great deal of commercial development to the area between Victoria Park and the sea. To the east, the release of railway land has seen an explosion of cheapjack apartment blocks overlooking the port. The east stands as a warning of what not to do in the west.

If the planners can do the western side right it could draw a critical mass of commercial development in that direction and turn central Auckland into the harbourside city it should always have been.

But doing it right does not mean swards of public open space along the sea front. If anything was to kill the prospect of a popular waterfront it would be to designate most of the area as a public reserve and allow civic draughtsmen to lay it out with concrete and grass in cold, architecturally-satisfying, spatial concepts.

The inner city has had this sort of treatment in the civic centre and downtown. Aotea Square is a success for skateboarding and not much else, Queen Elizabeth Square has been a triumph of planners over people.

For a short time people were winning. A few years after the downtown square was laid out beneath the shade and downdrafts of the Air New Zealand building, people turned the places where the sun reached into quite a lively plaza.

Fruit barrows and exotic fast food stands set themselves up in the different sectors of the design plan. The place attracted street performers, soap box orators and was an assembly point for protesters. It was a place to meet, eat, or just pause and watch human life for a while and people did.

But it turned out to be not what the designers planned. Eventually City Council designers with too little to do decided Queen Elizabeth Square was "not working". It was a bit "chaotic".

Officials came down and ordered the food stalls into a neat line down the middle. That was the beginning of the end. Fewer people stopped there. The place became just another thoroughfare. Today it is a bus terminal.

The designers did much better with the Viaduct. Its success is the only reason we are talking about a wider waterfront now.

But the success of the Viaduct is not due simply to the human scale of the place. It owes at least as much to the way commercial activity is combined with public areas there. That is the formula to follow.

It does not necessarily mean more apartments, restaurants and bars but if there is a demand for them, let it happen. More likely the commercial activity would change as you proceed west from the Viaduct. The high life would give way to marine industries much as it does now.

Possibly the best thing the designers could do would be to find ways that the fish markets, boatyards and every sort of marine servicing depot could continue to operate there with more generous public access to the same waterfront.

I'm sure this would present more of a problem to planners than it would to people working or walking on the waterfront.

Planners abhor chaos, but left alone people would quickly resolve so-called issues of conflicting use.

So long as it was clear that both the public and marine industry had an equal right to be there, they would demarcate the territory fairly clearly. Paving and public seating, strategically positioned, could probably do it without need of barriers everywhere.

People should be able to walk right around the perimeter to that splendid site at the end of Wynyard Wharf, which must be preserved in public ownership but, even there, commercial development should not be discounted.

On recent Auckland evidence, commerce produces a better iconic building than the City Council. Compare the Sky Tower to the Aotea Centre. One is bold, the other cowering.

The Sky Tower had many critics when it was proposed, and even when it was built. But it has become such a familiar and striking feature of the Auckland skyline that if the casino ever wanted to demolish it I have no doubt there would be a vociferous public preservation campaign.

Maybe no other construction could match the tower for grandeur but that tank farm site will inspire something exceptional. But no matter how grand the design let's not consign it to a cultural purpose as Sydney did. Let's come up with something that will have commercial life. That's where people go.

Paul Thomas: There's no good reason for such nice behaviour

Among the many paradoxes of our curious times is the fact that while we're constantly urged to "Have a nice day," many of the people we encounter in the daily round seem determined to ensure that we don't.

I need to be a little careful here. This newspaper was recently identified as the spiritual home of the grumpy middle-aged male columnist so I wouldn't want to get into a turf war or suffer by comparison with colleagues who've done the hard, grouchy yards and earned their curmudgeon status.

Besides, I'd like to think I've got a few more years of wary optimism in me. After all, aside from the various spectres hovering over us - bird flu pandemic, nuclear showdown, terrorism involving weapons of mass destruction and the meltdown of the ecosphere - the truth is, we've never had it so good.

Who better to start with than those who end every social interaction by chirping "Have a nice day"?

Why nice? Nice is bland, antiseptic, lukewarm; nice is what you fall back on when you're grasping for a word that conveys lack of enthusiasm without giving offence; nice is the last refuge of the chronically insincere.

There's a good reason why teenage boys groan inwardly whenever a girl tells them they're nice. It's the kiss-off, the high hat. It means that at a push she wouldn't mind having them as a friend but as for going out, forget it. It means she finds them boring and suspects that when it got down to the nitty-gritty, they probably wouldn't know what to do and, if they did, wouldn't have the nerve to do it.

Cliff Richard's nice and he's a 65-year-old virgin.

Then there are tradesmen and their radios. What is it with these guys? Why are they incapable of painting or building without having the radio on at an intrusive volume?

It's not as if they actually listen to it. It once took me five minutes to get it through to a builder working on the house next door that his radio was disturbing the entire neighbourhood. He couldn't make out what I was saying just as he couldn't hear his radio because he was wearing earplugs to drown out the noise of his electric saw.

And it's not as if their radios are ever tuned to the National programme. It's always a classic hits station with a horribly smarmy DJ, or talkback in full moon mode with morons roaring at each other like deaf men arguing over the words of a song.

Next come haircutters who think that you've come in for a chat, and they've really got the solution to the P epidemic or the traffic problem.

I recently had my hair cut by a lady from Vladivostok who finds houses in this country insufficiently warm and was agitated by the annual panic over water levels in the hydro lakes. In the hope of bringing the discussion to a swift conclusion I suggested the obvious answer was to go nuclear.

Instead that triggered a long wail about Chernobyl and nuclear submarines being left to rust in Vladivostok harbour. I thought of pointing out that New Zealand hasn't followed the Soviet Union's lead in many areas but presumably that's why she came here in the first place.

Taxi drivers, on the other hand, can talk all they like as far as I'm concerned. Whether it's because they're exposed to a wider cross-section of society or tend to be considerably less fey than your average hairdresser, I find taxi drivers provide useful insights into the mood of the nation, specifically which lunatic conspiracy theories are in vogue.

Clearly one can't undertake this sort of exercise without reference to television personalities.

For space reasons I'll confine myself to the sporting punditry: why is it that several of those who provide "expert" comment for rugby coverage that, as we're always told, goes out to half the known universe are hell-bent on portraying us as a nation of dimwits?

And if Richie Benaud with his dry understatement and deft economy with words is the doyen of cricket commentators, why don't ours ever shut up?

Rounding out this pests' gallery are the New Puritans who are offended by the sight of their fellow citizens enjoying themselves. These people have an alarming statistic for every pleasurable activity and seem to think that no one who requires hospitalisation or expensive medical treatment has ever paid tax.

They include the snoops and tell-tales who characterise harmless vulgarity or minor lapses of judgment in the workplace as wickedness that cannot go unpunished. So the cyber-circulation of an indiscreet message or bawdy joke or titillating image is deemed a crime that warrants public exposure, the modern equivalent of being put in the stocks.

Never mind that similar images are used to sell everything from deodorant to insurance on prime time TV, and the same salacious gossip and off-colour jokes are exchanged around the coffee machine. Never mind that people still do the crossword, paint their fingernails and make personal phone calls on company time.

When these people say "Have a nice day," they really mean it. They look forward to a time when we won't have any choice.

Paul McIntyre: Brits too bloody starchy for Saatchi

Remember late last year when those wicked Australians pinched the company behind New Zealand's highly successful "100% Pure" international tourism marketing effort?

Well, those responsible for the ambush on New Zealand are now in deep trouble with the Brits.

After months of secret strategy talks setting Australia on a path to increase international visitor numbers from the current 5.5 million each year to 9 million by 2014, New Zealand's old tourism advertising shop, M&C Saatchi, two weeks ago unveiled Australia's controversial new work - a $180 million global effort underpinned by the words "Where the bloody hell are you?"

The campaign, destined only for international markets, got local punters and media tied up in knots about how such a tagline would upset the Singaporeans and how it would translate poorly into Korean and Japanese. The intellectuals certainly didn't appreciate it but on most newspaper websites, Australian punters overwhelming voted in its favour.

The debate was still loud enough for Prime Minister John Howard to step up a day after the new ad was launched to defend Australia's new bloody face to the world: "I think the style of the advertisement is anything but offensive," he said. "It is in the [right] context and I think it's a very effective ad."

And in defending the commercial last week, Tourism Australia's managing director, Scott Morrison, argued that the critics had got their wires truly crossed.

"In short, it's not a cultural essay, it's just a bloody tourism ad, and a good one," he said.

"And before we rush to ask how 'bloody hell' translates into Korean or Japanese, the answer is not the point. We constructed our message and tested it on them in our top seven markets and they gave it the thumbs up, saying it cuts through, they get it and that it delivers a uniquely Australian invitation. Why? Well, first, because no one sits down in their living room after watching an ad and writes essays about it - deconstructing its language and hidden meanings. Normal punters just watch the ad and react."

And react is exactly what those bloody poms have done. The nation that brought Benny Hill to its colonial outposts has been the first to banish Australia's new tourism push.

The British snub might well have New Zealand's tourism boffins delighted by the justice in it all, although it now looks like the Australians are hell-bent on turning the whole British saga into a PR coup.

"It's bloody pathetic," says one of M&C Saatchi's London-based partners, Bill Muirhead, pointing out that Britain's Broadcast Advertising Clearance Centre, which vets all TV ads, has allowed commercials from companies such as FCUK to continue. "We are going to see if we can take legal action."

Australia's Tourism Minister Fran Bailey told the Nine Network yesterday the British controversy was turning into good publicity for Australia.

"We're getting a great result," she said. ' "Now thanks to the regulator everyone is hearing about it."

It is just a touch British that the country that came up with the word 400 years ago can't deal with it on TV screens.

"We tested the ads in all of our markets and it came back of course that the Brits loved it," Bailey said. "The crazy thing about this as well is that it can be shown in all cinemas, online and in all the print media. So it will go ahead in the uncut version in all of those."

Bugger, a few New Zealanders might well say.

* Paul McIntyre is a Sydney journalist

Brian Gaynor: Let's hear it for the Trade Me genius

Sam Morgan of Trade Me is a genius, he should be appointed to the board of Contact Energy and every other New Zealand company that is vulnerable to a takeover from Australian or other offshore interests.

Morgan is the first controlling shareholder of a $500 million-plus company to obtain a full value since Peter Masfen sold Montana Wines nearly five years ago.

And $700 million is a great price when you considered that Capital Properties, which has an extensive property portfolio in Wellington, is going to the AMP for $358 million, Ports of Auckland was sold for $848 million and the NZX, which has been around for nearly 150 years, has a market value of just over $100 million.

Morgan started Trade Me in August 1999 with capital of 150,000 $1 shares. Subsequently, 44,730 new shares were issued and these $1 shares are worth $3595 each under the Fairfax offer.

Morgan, the largest of the 12 shareholders, will receive $227 million while the smallest investor will realise $6.5 million.

If Morgan invests his proceeds in 90-day bank bills, he will receive interest of $46,800 a day at present interest rates. Not bad for a 30-year-old less than seven years after he started the internet auction company.

One of the more fascinating aspects of the transaction has been the widespread comment in New Zealand financial and media circles that Fairfax may have paid too much.

Why should we be concerned that Fairfax may have paid too much for Trade Me? Were the Australians worried that Telecom might have overpaid for AAPT or The Warehouse was too optimistic when it bought Clint's Crazy Bargains and Silly Solly's?

Purchasers always face risks when they pay a full price for acquisitions. Northern Hemisphere academic studies show that a large percentage of acquisitions do not succeed because over-confident managers pay too much and they don't achieve the synergies they anticipated.

That is what should happen. Why should existing shareholders eliminate a purchaser's risk by selling at less than maximum value?

Unfortunately we are used to selling assets at low prices and virtually eliminating the acquirer's risk. Thus we are surprised when an offeror takes a big risk and pays maximum price for one of our companies.

We first started selling assets cheaply in the late 1980s through the Government asset sale process.

Postbank was sold to the ANZ Bank for $665 million in a tender process, and the second-highest bidder was Sir Michael Fay and David Richwhite at a third of that price. The two New Zealanders were convinced their bid would be successful because the perception of value in New Zealand was that $200 million-plus was fair.

Postbank proved to be an excellent purchase for ANZ Bank.

Telecom was sold for $4.25 billion in 1990 and, seven years later, it was worth more than $15 billion.

In 1992, the Bank of New Zealand was sold to National Australia Bank for $1.5 billion and is now worth an estimated $8 billion.

Tranz Rail was sold for $328 million in 1993 and the price was so low that the purchasers made a complete mess of the company and still walked away with vast profits.

Subsequently, we have sold a large number of companies in the media, forestry, energy, food and beverage sectors. Most of these sales were at such low prices that the acquirers carried minimal risk and made huge profits from their investments.

The 2003 sale of Independent Newspapers' publishing assets, which included The Dominion Post, The Press (Christchurch), Sunday Star-Times and Sunday News, to Fairfax is another example of a low-priced sale.

The sale price of $1.188 billion was largely based on an ebitda (earnings before interest, tax, depreciation and amortisation) forecast of $137.1 million for the June 2004 year, whereas the outcome was $165.5 million or 20.7 per cent above forecast (the June 2005 year ebitda soared to $190.9 million).

But the important point is that the sale price was based on a forecast ebitda multiple of 8.7, whereas earlier transactions in New Zealand had gone through at an average forecast ebitda multiple of 10.5 and Australian, United Kingdom/Irish and North American newspaper acquisitions at average forecast multiples of 11.4, 12.6 and 11.2 respectively.

The average forecast ebitda multiple for listed Australian newspaper stocks, excluding any premium for control, was 9.9.

Why do we sell our assets at much lower multiples than overseas when many of our companies face little competition and have the potential to achieve very high operating margins? (In the June 2002 year, Fairfax's Australian publishing operations had an ebitda margin of 22.2 per cent and INL 21.9 per cent. In 2005, the Australian publishing activities had an ebitda margin of 25.1 per cent and New Zealand 33.6 per cent.)

Grant Samuel, the independent expert, concluded that the $1.188 billion offer for INL's publishing assets was "fair" although it didn't define what it meant by "fair". It noted that the proposed transaction was not the result of a competitive tender process, and it was difficult to conclude that the Fairfax offer represented the maximum price achievable.

Surely the objective of every director and shareholder is to achieve the maximum price, and if the independent expert states it cannot be sure that the offer represents maximum value then the bid should be rejected?

Maybe one of the reasons that Fairfax is paying a full price for Trade Me is because it bought INL's publishing assets so cheaply.

Other reasons include the high ebitda margins achieved by internet companies and the huge ebitda multiples they trade on. If chief executive David Kirk can convince investors that Fairfax is more of an internet organisation, then it will trade on a much higher ebitda multiple.

Internet companies achieve much higher ebitda margins. The ebitda margin of eBay is 43.1 per cent, Google 37.8 per cent and Yahoo 40.7 per cent.

By comparison Gannett, publisher of USA Today, has an ebitda of 30.6 per cent, the New York Times 16.6 per cent and Time Warner 17.1 per cent.

As the accompanying table shows, old media companies trade on much lower ebitda multiples than internet stocks. This is the reason why it is much more rewarding to establish a successful internet company than a big-selling magazine or newspaper.

But the long-established Dominion Post, Sydney Morning Herald (Fairfax), New Zealand Herald (APN) and New York Times are predictable and stable, whereas the internet is far more competitive and risky.

Time Warner merged with the internet giant American Online (AOL) in 2001 and this is still the world's biggest corporate deal.

The merger has been an abysmal failure, with the group reporting a loss of US$99 billion ($153.4 billion) in 2002, mainly due to the write-down of goodwill associated with the merger.

Kirk is taking a big risk and he won't want to repeat the Time Warner/AOL experience.

We should applaud Kirk's ambitious goals and willingness to pay top dollar to achieve his objectives.

But more importantly, we should congratulate Morgan for finally convincing the Australians to pay full value for one of our companies.

Although Trade Me is being sold on a lower forecast ebitda multiple than eBay, Google or Yahoo, these three companies have worldwide operations, whereas Morgan's will remain New Zealand-focused. In this regard, Trade Me is more similar to the old media companies than the three US-based internet giants.

Disclosure of interest: Brian Gaynor is an investment strategist and analyst at Milford Asset Management.

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.