Winter Olympics Vancouver - What is the Best Measure of Success?
We’re all familiar with the medal tally that comes out of any Olympics, summer or winter and there’s much conjecture about the relevance of the medal tally. From the recent Winter games that were completed in Vancouver, the overall medal tally (i.e summation of gold, silver & bronze medals) was as follows:-
United States 37
Germany 30
Canada 26.
Based on the overall tally Australia came in 18th with 3 medals.
However, if success is ranked by gold medals then the leaderboard is
1. Canada
2. Germany
3 United States and Norway.
Australia comes in at 14th.
Recently though there was an article referenced on the Freakonomics website, where they recast the medal count by market value. The gold and the silver medals are actually 92.5% silver, while the bronze medals are mostly copper. So the gold medal, which is really just gold plated, is valued at $537, the Silver medal is valued at about $300 and the bronze medals are valued at about $3.40.
When the medal tally is ranked by market value then it is as follows:-
1. Canada $9,635,
2. United States 2nd $9,377
Australia was 14th with $1,374.
However, if you count every medal won by a country, i.e. one for each player, on the hockey team and the bobsled and so forth, then Canada was very much clearly out in front with $41,000 of value and 68 gold medals. The USA with 12 gold medals and had a market value of $25, 719 in value and based on this measure Australia was 15th with $1,374.
Now these are an interesting aside, but the interesting question is “What is the best measure of success that we should be looking at from an Olympics?” As you know, I always try to boil it down to the one main number, the one main thing we focus on and I’ve been trying to consider in my mind, what is the important measure for the Olympics.
Now as a little context, some years ago I had some involvement with the New Zealand men’s kayak team for the Athen Summer Olympics. I assisted in taking some video, during their training and providing other support roles as they were training on the Maroochy river here in Queensland (yes it was the New Zealand team).
The conversation with these people in thea New Zealand team was purely focused on the Gold Medal. Two of them went on to win silver medals, and they were happy to have won a medal, but there was no doubt that they believed that they’d lost gold, rather than won silver. Also the athletes looked at what their personal best times were, and they looked at how that compared to where they’d been.
I’m not going to conclude or give an answer on this post. I am going to ask for comments but, I believe that the athletes would say its gold medals, or personal best times.
It’s interesting to think that the media focus has been significantly on the gold medal tally, but I would like to see what the tally of personal best achievements was. When we think of the motto of the Olympics, ‘Swifter, Higher, Stronger’, I think it’s probably in the spirit of the Olympics to look at the personal best times.
But of course, if I was a Canadian I would be looking at value based on market value and counting every gold medal awarded to every player, because this places them with 68 gold, 15 silver and 8 bronze to a value of $41,043. A clear winner, go Canada!
AIG Bonuses - Right & Wrong
Last night I was having a conversation with some colleagues about the economic situation and the issue of the AIG bonus payments came up. Of the 4 of us present, the other three all felt that the bonus payments should not have happened. Yes you guessed it, I don’t agree.
So let me explain. From what I understand these payments are made to approximately 200 people under contractual arrangements entered into when these people joined AIG. Also these bonus payments are only payable based upon certain criteria being met. Therefore with this as the basis I firmly believe that all economies are founded on the basis that contracts are enforceable and somebody can not get out the contract at a later date if they want to change the goal posts. Thus the payments must be met to honor the obligations. If you say that since everything has changed and therefore the bonus payments should not be payable then where do you stop. Who has the discretion to honor which legal contracts? Remember these people getting the bonuses are not as I understand it the board or the CEO. The people getting it are the revenue generators for AIG.
I believe that the payment is to be made, so why has it become a big issue. It is obvious if you are a politician it is easy to be antibusiness and whip this into a fever pitch issue. I am concerned about the antibusiness sentiment that is coming out of the government in the US.
Now one of my colleagues stated that whilst the legal contracts may be correct but morally these people should not get the payments. I believe that morally the leadership of AIG has to honor its commitments to the team – so it cuts both ways.
Let’s look at these items in the cold hard light of day and remove the political vested interests from the argument.
There is a salient issue here in that businesses need to measure what matters i.e. what matters to the customers and make these measures the ones which rewards and bonuses are paid. If this was case then the bonuses would possibly not be payable.
I would love to hear your comments on this.
Do stimulus packages work? Are we spending the money wisely?
Whilst I don’t profess to be an economist (maybe that is a good thing) I have read and listened to a number of Nobel laurate economists the question is do the stimulus packages work? The USA have recently passed their second stimulus package since the crisis started, Australia has also passed their second package and China is looking at a second stimulus package. Japan in the 1990’s and early 2000’s passed NINE packages in 11 years to no avail.
Whilst there are some to who say they do work, there are plenty of qualified economists who doubt the impact of them.
From my personal viewpoint is that not enough of the stimulus packages (particularly in Australia where I live) is being spent on innovation. The future of our nations will not be built on cash handouts or tax cuts to spend but rather we need to invest in innovation so there is a long term legacy. The trouble is the handouts are politically easier, whereas innovation is harder to see. The country reaps the benefit of innovation down the track.
Do you think these stimulus packages should have been passed? Do you think the money is being spent in the right area?
Australia’s Fiscal Stimulus
Here in Australia the government has announced a $42 billion stimulus package. But the question is - where is the money coming from? The stimuls is expected to push the budget into deficit by as much as $35 billion over the next two years. The previous government paid off the net government debt of $96 billion. Now the government will issue new debt of $24 billion in the next 5 months. The cupboard is now bare - we are going into debt as a nation.
Who is going to buy the bonds? US & UK are also desparately seeking purchases of their debt. So it would seem that a significant portion will be purchased by Australian investors eg your superannuation fund. It would seem our super is funding the spending spree.
There are estimates by the major banks that the outstanding government debt could move to $161 billion in the next three years.
I hope this stimulus achieves something as it seems that we will be paying for it for some time to come.
Government Plan for Construction Industry
The Australian Government has announced a $4billion plan for the construction industry. The notion is that this support package will preserve jobs and therefore it appeals. But.. it is taxpayers money we are talking about. Is this the best usage of our funds to provide support to developers and commercial builders. Our taxpayer dollars could be used to build more units on the Gold Coast meanwhile ensuring developers profits are preserved. Yes the government needs to be proactive to assist those affected by the downturn but is this the correct way. I don’t think they should be picking winners in the building industry.
Inflation or Deflation - what does it mean for your business.
At the beginning of 2008 we were all worried about inflation. This was the case in Australia as well as all of the other developed economies. We were concerned about interest rates rising to curb inflation and what this would mean to business. Now at the beginning the concern seems to have flipped to that of deflation.
Deflation refers to falling prices. The CPI (consumer price index) would decline. Deflation occured in the 1930’s and more recently in Japan. Deflation can be good but if it is connected with falling wages, rising unemployment and falling asset prices it can be very nasty.
With our high household debt levels, deflation could be ugly. If the house prices fall at the same time as incomes are affected then consumers will cut their spending and try to sell assets to reduce debt.
US inflation has fallen from 5.6% to just 1.1% and it’s still falling. So far, Chinese inflation has fallen from a peak of 8.5% in April to 2.4% in November. Also based on the Reserve Banks comments inflation in Australia is falling.
The CPI has been signficantly affected by the falling oil and food prices. However if businesses increase their discounting of goods to sell more then further reduction of inflation will occur. Also a recession normally leads to spare capacity. This is happening in China now. This means they reduce their prices to keep production going leading to deflation in the trade partners of China. Our fall in the exchange rate will push up import prices and this will lessen the impact on Australia. Still inflation is likely to fall in Australia.
But a rerun of the deflation of the 1930’s is unlikely because the central banks have means to continue to prime the economy. Our Reserve Bank like the other central banks of the world have shown a capacity to drop interest rates significantly in an attempt to keep the economy moving. Lastly our weak exchange rate will help to keep prices of imported goods higher.
So I believe that in 2009 inflation will tamed and deflation is a concern but should not be significant concern in Australia. It may be more of an issue in the US where they are in a severe recession.
Interconnectivity of Economies
Given the turmoil that we have experienced in the world financial markets in 2008 it has proven beyond a doubt that we are all connected more than we ever thought. In 2006 and even 2007 there was the theory of decoupling of the various economies. For us in Australia it was said that we were more connected to China than Europe or the USA. When the first rumblings started to happen in the US economy in late 2007 there were many pronouncements that this would have no impact on Australia.
But now that the market is down 45% from the levels of late 2007 the theory is on the scrapheap. The turmoil that started in the US housing markets has extended to Europe, China, Australia and the rest of the world.
Over the last decade we have seen globalisation gather steam in business. Businesses of all sizes have improved their supply chains. Orders made by clients in Australia can effect production in China within hours.
The Australian economy is very reliant on the mining industry and given the downturn in demand in US and Europe, China cut it’s production immediately which has had a significant impact on the producers in Australia.
The lesson we have learnt is that we are all very closely connected. Australia is not an isolated island. As a business we need to keep aware of the developments around the world. What are businesses doing in your industry around the world? What does the development in the economies of world mean for your business?
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