Musings – Page 15 – Andrew E. Scott

Pre-parent retrospective

Well, given that I’m coming to the end of the pre-parent period, I might record some of the weirdness. At least, before it’s eclipsed by the upcoming weirdness of actually being a parent.

The whole process has been a reversal of the “natural order of things”, as I’ve come of think of them since I became a teenager. I guess this is part of the universe preparing me to have everything turned upside down, and rearranged in new ways when our little girl arrives.

However, I wasn’t prepared for how weird some of this stuff felt. For starters, how are you supposed to overcome the years of conditioning on contraception? Enough said on that one.

And I’ve previously commented on the whole period that follows where you lie to your closest friends for months. How strange is that?

Then there’s the sudden interest in female human biology. All those birth classes are a bit of a crash course. Ordinarily this would be a worry, wouldn’t it?

Plus getting all the baby furniture, equipment and accessories in readiness. The technology and terminology turns everyone into geeks. Normally that level of geekiness is considered rather over the top, but in this context, it’s perfectly okay.

But the strangest thing of all is knowing that there’s another organism growing inside Kate. You can see it moving under the skin. That’s the sort of thing that would feature in a horror movie. However, when we go to the doctors about it, they are just very excited for us.

Most of the time I’m excited for us, and looking forward to the future we’re going to have together. But, there are moments when it all seems completely surreal.

My pet hate

Or, my current pet hate, I should say, is commuters who don’t sit down.

Let me expain.

Melbourne public transport is currently extraordinarily popular. And when I say popular, I don’t mean people like it, but they do have to use it. The Herald Sun reports that one in five Melburnians are using it to get to work, and there are now 30% more people riding it than three years ago.

When I catch the train in the morning, there are usually something like twenty people crowded near the doors on each carriage, and everyone at my platform has to push to get on. So, when I do manage to actually get on, and I’m crushed nose-to-armpit with the morning mosh-pit, how am I supposed to feel when I see empty seats?

Unbelievably, most mornings there is at least one seat free. However, there is a strange ethic that means people don’t want to sit down. There is some kind of pride in standing. Sitting might deprive some other hypothetical traveller of a seat who is more entitled to it. Sitting down seems to be a greater evil than causing people to be crushed half to death.

Please! People! If there’s a seat near you, then sit in it! I’d rather watch you enjoying a seat than have you contribute to my discomfort.

Maybe this whole rant qualifies me for Grumpy Old Men, but the crowding on public transport is only going to get worse, and we need to change seating etiquette if we are to cope.

Misled by the Kensington Association?

When we moved to Kensington, over a year ago now, we were aware that we were joining a suburb that had something rather unique: its own lobby group. This group, the Kensington Association, was working hard to reunite the suburb of Kensington which, under Jeff Kennett, had half its region assigned to the Melbourne City Council for management, and the other half to the Moonee Valley City Council. This was an odd state of affairs and, in December last year, they succeeded in getting it corrected, with the whole suburb to move under the Melbourne City Council on the 1st July 2008 – i.e. next week.

Of course, there were two broad options for reuniting Kensington – everyone goes to Melbourne, or everyone goes to Moonee Valley. The Kensington Association was vocal in encouraging the Melbourne option, and one of the key reasons promoted was around waste services. A person set up at our local shops to promote their agenda promised me, since I was currently under Moonee Valley, that a shift to Melbourne would result in better street sweeping and the recycling bin being collected twice as frequently. Accordingly, I was convinced that shifting to Melbourne was the way to go.

Except this week, the Moonee Valley City Council took away our green waste bin. It turns out that all is not better with Melbourne City Council, as they don’t offer a regular, kerb-side garden waste collection service in any of their suburbs. Their option is for residents to store the garden waste somewhere, book a garden waste pick-up on a particular weekend per month, and when the council turns up, you need to help them load the waste onto their truck. Hmmm. In all of the Kensington Association’s research and publications on the merger, this little implication was strangely missing.

(And in Melbourne’s recent waste and recycling FAQ, it states that weekly recycling collection will not begin until October 2009, so this potential benefit touted by the Kensington Association is still a long way away.)

What makes the issue of green waste so relevant is that Kensington has a disproportionately large number of houses for an inner city suburb. Based on the data from a popular real estate website, we can construct the following table of suburbs that fall under Melbourne City Council’s management:

Suburb	Separate Houses	Semi/Terraces	Flats
Kensington	28%	24%	44%
North Melbourne	8%	33%	52%
Parkville	7%	34%	53%
West Melbourne	5%	60%	21%
East Melbourne	5%	24%	62%
Carlton	1%	34%	54%
Southbank	1%	2%	85%
CBD	0%	8%	75%
St Kilda Rd	0%	0%	87%

And yes, I know that none of those rows add up to 100%, but that’s the way the numbers came. *shrug*

So, it’s clear that the Melbourne City Council’s not going to have much of an interest in providing a useful green waste service unless they do a special favour for Kensington ratepayers (and maybe those West Melbourne residents in their numerous terrace houses). Or maybe, our local lobby group (if you’re listening) can take a few minutes from their current campaign to save a park and help out those people you misinformed in your last campaign.

Food but not Drink

Being in the middle of a work trip to Berlin and London at the moment, I was again reminded of how far we’ve come with in-flight catering. The food can be quite tasty. For example, I had a crispy croissant, flavoursome satay, and a superb steak in the last 24 hours. However, one aspect of the meals is a constant disappointment: the hot drinks.

Both the coffee and tea still taste like they did 20 years ago. Any Melbourne cafe serving that quality of beverage would be out of business so fast that you’ve only have enough time to ask for your soy-decaf-mocha and it would be gone. Surely it’s time the standard can be lifted a little? Maybe even to Starbucks level? I’m not expecting that Degraves St cafes will be transported into the air immediately.

One possible reason is pressurisation. Apparently modern aircraft are pressurised to the equivalent of 2,500m altitude. This is for safety reasons, and I expect also saves on fuel. But water boils at a lower temperature at altitude, and maybe this defeats any ambition of a decent cup.

Ironically, coffee beans grown at high altitude attract a premium, as does coffee roasted at altitude. And the world’s premier tea plantations are also at altitude. This raises the obvious question: if these people are making the best tea and coffee – do they actually drink it? Or, do they need to head down to the lowlands to brew a cup of caffiene heaven? Surely not.

Well, whatever they’re doing, the airlines need to find it out. And fast! I’ve got another three flights in the next week, and I’ll need a decent coffee fix…

And the non-profits shall inherit the earth

The difference between a for-profit organisation and a not-for-profit organisation is simple, obvious and profound. For-profits have owners for which they generate profits, while not-for-profits have stakeholders for which they accomplish their aims. However, both can have customers that they service, both can have products they sell, and both are able to raise money. They can also compete with each other.

For example, the Guardian Media Group is owned by the Scott Trust (no relation), and runs a number of media businesses in the UK, including The Guardian newspaper. It competes against mainstream newspapers in the UK, and does reasonably well, despite not being controlled by owners or shareholders.

There is also the John Lewis Partnership, which runs a number of retail businesses in the UK, including the Waitrose chain of 187 supermarkets. And also the engineering and manufacturing company Scott Bader that operates all around the world, but is effectively owned by the employees rather than shareholders. (US based employee-owned companies are tracked here, while UK based companies are tracked here.)

Many for-profit companies, competing against such non-profits, are at a competitive disadvantage: they have to pay a proportion of their earnings to people outside of the company, rather than reinvesting it in the business or the employees. Owners are effectively an overhead that returns nothing to the business. Of course, not all businesses have owners that are leeches – many famous and successful companies never paid dividends to their shareholders.

Berkshire Hathaway, run by Warren Buffett, doesn’t pay dividends. Luckily the growth in the value of BRK shares more than makes up for that. Also, Microsoft didn’t pay dividends until 2003, after many years of stellar growth in MSFT stock.

However, most companies are not like those. Many companies pay out between a third and half their annual profits in dividends. Not-for-profits do not face this burden, giving up the potential funding source of raising money from sharemarkets, but in return enabling them to set lower prices, given the same cost base, product quality and service levels as their competitors.

This suggests that not-for-profits, while potentially more constrained in terms of the money they can raise, can outcompete the for-profits in their own markets. In Australia, not-for-profits have tended to operate charitable businesses rather than commercial ones, but I wonder if we’ll see more and more of them appear in the future, given their advantageous competitive position.

Google sends me cheques

Okay, they’re not very big cheques, but the ads on this site apparently get clicked on by enough people that Google sends me cheques. Okay, only one cheque so far. It was for $120.47 – that’s enough to pay for my hosting fees.

Although, I hear you asking, how can an obscure personal blog get enough visits – let alone clicks – for Google ads to work? This is an obvious question, with a pretty interesting answer, that if I have it right, suggests that web ads are a special case of search ads.

A quick tutorial. Google has two advertising programs: AdSense and AdWords. AdWords enables advertisers to submit ads that are displayed against particular words or search terms (e.g. “negative gearing”). AdSense enables web page authors/publishers to give-up space on their pages for ads to shown. Google matches the AdWords advertisers with AdSense publishers in order to maximise the chance of visitors clicking on the ads.

I am a member of the AdSense program, but it’s really token involvement. You’ll see only a single text-based ad block, capable of showing two ads, on any page. I’m not exactly running an advertising honey-pot, here.

However, apparently certain pages on this site are popular enough to attract a significant amount of traffic. The top pages are (in order):

Now, I haven’t run the stats (yet), but of the above, the only pages with ads that seem likely to generate clicks are the Best Man Speech, Cheesecake Recipe, Positive Gearing Analysis and Investment Book Reviews. These aren’t pages that change at all often, so it’s not my regular readers (!) who are clicking on those ads. I think this is the norm for blogs – it’s not the regular readers generating advertising revenue.

The ad revenue comes from those who arrive on the site via web searches. Near 80% of all visits come from search engines. The top search terms of visitors are:

“best man speech”, “best man speeches”, and “bestman speeches”
“cheesecake recipe” and “cheesecake recipes”
“positive gearing”

Those terms account for a third of all search visitors, and there are several other variants of those. What it strongly suggests is that there are people searching for particular terms, and instead of clicking on the paid ads in the search results they click on a link to one of my pages. And then, once they’ve arrived on one of my pages, they click on a paid ad.

One explanation is that the pages on my blog provide a type of advertising filter. Perhaps the search engine , say Google, is not able to fine-tune the paid ads when all it has to go on is the term “best man speech”, but when Google can utilise all of the words in one of my pages, it does much better. So much so that people click first on a real page, not as a way of getting everything they want, but as a way of giving Google more information on what they’re after.

And a diversity of topics on a blog lends itself to being used by Google in this way. Typically a blog will focus on a single topic and build up a readership that is strongly interested in that topic. But those readers aren’t likely to be clicking on ads anyway. So my atypical approach of rambling wildly about many things doesn’t build up much of a readership, but it does enable Google to use my content to optimise its ads and hence pay me a small commission when people click on them.

The Summit – or perhaps a long way from it

2020 Summit logo I have been pretty interested in seeing the outcomes of the Australia 2020 Summit, and even put my own submission in. And in trying to find some detail on how the first day of The Summit went, I came across Andrew Bolt’s blog posts on it.

Andrew Bolt is pretty amusing, and strongly stands in the conservative camp. But I could not believe what I was reading – it sounded like the first day was a complete waste of time. How could this have happened – surely it was professionally facilitated? Well, I then checked out the the video of the first day’s plenary highlights.

It wasn’t as bad as I had feared, but it was pretty bad. Almost everyone put on camera struggled to communicate their thoughts or articulate what initiatives are looking likely. Most seemed to be in awe of the celebrities and powerbrokers also present. We got a lot of motherhood statements, but they genuinely seemed to feel uplifted by being a part.

However, the Summit’s not for them, it’s for us. Here are the initiatives that were mentioned by people in the video:

Put indigenous people on the boards of cultural organisations.
Establish a Ministry of Culture (don’t we have one already?).
Draft a national Cultural Policy (isn’t that it’s job?).
Mandate a national Creative Curriculum.
Draft a national Action Plan for Social Inclusion.
Provide one-stop-shops for local communities for housing and communal support.
Establish a Community Services Commission, like the Productivity Commission.
Establish a National Sustainability Commissioner, like the ACCC.
Draft a national agreement/treaty with indigenous peoples.
Set a policy of continuous disclosure for the government, particularly online.
Draft a Bill of Rights.
Become a Republic.
Establish a “rights based labour mobility programme” to enable Pacific peoples to work in Australia.

Alright – that last one isn’t like the others. It is actually an idea that sounds new.

I understand that each of the ten groups is meant to identify one “big idea” and two or three smaller policy initiatives that could be worked on following the Summit. So, that’s up to 40 actionable items in all. The list above is for 13 items, so they still have 27 to find.

I really do wish them all the best, but if the above represents the results from Day 1 then there’s still a long way to go to fulfill the ambitions of the Summit by the end of Day 2.

All part of Sony’s grand plan?

From the side-lines, it’s been hard to fathom what Sony is up to. In fact, it’s easier to explain their actions as a lack of strategy rather than a grand plan. But, for the sake of argument, let’s assume they’ve got one.

Kate sent me a link to an article at The Age about James Gosling, who was touring around Australia recently. He’s an interesting guy, and I actually got to meet him. I also heard him speak at Sun Tech Day at the start of March, where he voiced an interesting thought: that players for Blu-ray Discs (got to have the hyphen) could make excellent TV set-top boxes.

The recent version of the Blu-ray specification (called Profile 2.0, also known as BD-Live) requires that the player has an Ethernet port, the ability to connect to the Internet, and 1GB of local storage. It’s intended for newer content to be pulled off the web to supplement the disc, rather having to rely on what’s stored on the disc. However, there’s nothing really to stop it from pulling all the content from the web, and having nothing on the disc. The disc could be a bit like the BBC iPlayer, and enable you to watch any movies or TV programs you like without having to insert a new disc.

And now that Sony’s won the HD-DVD vs Blu-ray war, we’re all going to eventually get Blu-ray players to make use of the High Definition TV screens we’re all buying. But what makes this different from all the other Sony boxes that you’ve ever bought, is that you may never need to replace any of your media.

Basically, every time Sony’s come up with a new format, they’ve needed to take one of two approaches: provide backwards compatibility with previous formats, or get people to buy all new stuff that conforms to the new format. The PlayStation is a great example of them following the former strategy – the PS2 and PS3 have been backwardly compatible, allowing people to keep old games. However, most of the time, Sony follows the latter strategy. Do you remember any of these..

Betamax, introduced by Sony in the mid 1970s – long dead
Compact Disc (CD), introduced by Sony and Philips in the early 1980s – terminal illness
Digital Audio Tape (DAT), introduced by Sony in the mid 1980s – now dead
MiniDisc (MD), introduced by Sony in the early 1990s – close to death
Memory Stick, introduced by Sony in the late 1990s – over the hill
Universal Media Disc (UMD), introduced by Sony in the mid 2000s – sad and lonely

You will note that none of those technologies was backwards compatible. With Blu-Ray, Sony has changed the game, and can potentially avoid the need to provide backwards compatibility – by delivering content from the Internet rather than on physical media.

The need to get people to purchase new media every time, meant that Sony could really only rely on selling a new box to play the media every 10-15 years or so, since there was such (understandable) resistance in replacing collections of music and movies. Without this limitation, Sony can continue to innovate with formats, adding new audio and video technologies which need new boxes to play, but without requiring customers to buy new media – since the content will be delivered from the Net. They will be able to sell people new boxes every 2-5 years, and stay ahead of the cheaper boxes coming out of China which will not have the latest features.

Or maybe this is all dreaming on my part, and Sony has no such plan at all.

Why negative gearing is not going away

Attacking the practice of negative gearing appears to have become a bit of a sport lately. On the 14th March, an article in the Herald Sun stated the government “should look at ways to overhaul an extremely generous system of negative gearing”, and on the 20th March, The Age ran an opinion piece entitled “It’s time to apply the brakes to negative gearing”.

I could speculate that the attention property investors (and their tax deductions) is due to the combination of increasing rents (driven by low vacancy rates) and high property prices (driven by a long stint of housing affordability). However, the cause is not important, and what is important is understanding why negative gearing is an effective housing subsidy.

In the Taxation StatisticsÂ 2005-06 publication from the ATO, we can see that:

There were 1,561,630 people who declared rental income on their personal tax returns.
66.5% of those had a taxable loss (net return income less than zero) from their rental properties.
There were 2,146,685 property schedules completed for those tax returns (note: where multiple people own a property, multiple schedules may be completed for those properties).

And in the Census 2006 QuickStats for Australia from the ABS, we can see that:

27.2% of occupied private dwellings were rented, which corresponds to 2,063,947 dwellings. (Pretty close to the 2,146,685 figure above.)

While in the Australian Social Trends 2007 from the ABS:

There were 394,000 first home buyers in 2003-04.

So, from that barrage of stats, it should be clear that the number of renters outnumbers the first home buyers (in any one year) by over five to one, and the number of renters combined with the property investors outnumbers them over nine to one. Why compare with the first home buyers? Because they are really the only housing segment that is disadvantaged by negative gearing. Beneficiaries include renters, existing home owners, investors and the state governments (through higher land tax and stamp duty fees).

Renters have their rent subsided by the ATO, though the tax deduction on costs provided to their landlords. What other business but property rental is regularly undertaken at a loss? It should be admitted the “obvious” effect of removing the deduction – rising rents – is unproven.

I would expect it to be likely that rents would rise, both from scarcity due to fewer landlords willing to operate without such a deduction, and from those willing to be landlords increasing their rents to maintain their investment yields. However, back in 2003, the ANZ’s Saul Eslake analysed the last time negative gearing was removed (by Paul Keating, between 1985 and 1987) and commented that:

It’s true, according to Real Estate Institute data, that rents went up in Sydney and Perth. But the same data doesn’t show any discernable increase in the other State capitals. I would say that, if negative gearing had been responsible for a surge in rents, then you should have observed it everywhere, not just two capitals.

So history is inconclusive. And, rents aside, although you might think that renters would benefit from being able to escape the rental market, many of them don’t want to. A survey by AAMI published on the 3rd April indicated that 39% of renters are “happy to rent and have no plans to have a mortgage.”

Existing home owners benefit from rising house prices since while prices go up, their morgage does not. Although when they come to buy another house, they will need to pay higher prices, they will typically sell their old house into the same market. Also, at some point, they will exit the housing market, and benefit from selling their house without having to buy one.

And that brings us to the conclusion. The group of people able to remove negative gearing are democratically-elected politicians. It’s highly unlikely that such a person will remove a policy that benefits so many, particularly when it’s a Labor government and renters are one of groups that benefit. True, it was a Labor government that removed it last time, but that also means they will clearly remember the embarrassment of having to reinstate it.

Let’s end the lies

10 week ultrasound We’re now telling people something we were denying before – that we’re expecting a baby. Kate’s 17 weeks pregnant, in fact. And the baby’s due around 10th September.

It’s a relief to no longer have to cover it up, and it’s exciting to be able to announce it to people. However, it’s a bit odd that something so positive is typically hidden from friends for several months before being suddenly sprung on them.

Ironically, the friends often already know, or at least are pretty suspicious. The signs are everywhere, and good friends tend to notice. Even if there is no morning sickness or change in body shape, the dietary hints are pretty clear. They wonder why a glass of wine, normally happily accepted, is now sadly refused. They ponder why the brie and proscuitto goes uneaten, and perhaps even why the seafood option isn’t chosen from the menu (although that’s never an option for us anyway). And particularly, “women of a certain age” are well attuned to these signs in their friends, but in the end are too polite to ask.

So, those people who we find it so painful to hide the news from are the very people that know anyway. Both parties (us and them) engage in a comedic farce where we all pretend nothing is going on at all, while desperately wanting to speak about it to the other.

But now, released from that cultural prison, I can tell you that I am very pleased (although a bit terrified) about the idea of becoming a dad.