Wednesday, February 24, 2021

The Countdown

 2020 was tough for many people. For me it included a different challenge although luckily one with a happy ending in the arrival of my son Finlay. My partner Fiona suffered from her waters breaking early, which is  medically known as Preterm Premature Rupture of Membranes(PPROM) . From there she ended up spending 10 weeks in hospital followed by Finlay arriving early and having his own 7 week stay.

One thing that struck me throughout was the degree to which I'd never really heard people talk about this kind of experience, but once people started finding out what was happening with us a huge proportion of people had similar personal stories to share. I hope documenting the experience might help other people going through similar situations.

4 Weeks

At 4 weeks Fiona found me in the front room of the house and while crying slightly said the classic and unforgettable line "We're going to have a baby". We then began all the normal bits of early pregnancy, like suddenly stocking the fridge with non-alcoholic beverages and thoroughly washing the salad while not mentioning anything to anyone.

7 Weeks

7 weeks was the first scan. We were still at the peak of lockdown, so Fi went by herself. Everything was looking fine, but the fetus was measuring a little smaller than smaller than we had calculated in terms of gestation based on Fi’s last period. Given it was the first scan it meant the official due date was moved a few days further forward than our previous estimates had been. At the time, moving the date didn’t seem like a big deal but it would have significant implications for some of the goals we faced later on. 

11 Weeks

At 11 weeks Fiona had a small bleed that triggered the first scary visit to the hospital. Luckily while the ultrasound did show that there had been a small hematoma it didn't seem to have damaged anything and the tiny potential human was still happily growing and swimming around without seeming to notice everyone outside freaking out. It did lead to Fi getting the first of a number of anti D injections that would become a semi regular occurrence due to her negative blood type and concerns about risks that could be shared between parent and child.

16 Weeks

At 16 weeks we started telling people that we had a baby on the way. The numbers said we were past the risky bit and growth on scans was looking good. We were also starting to be able to hear the heart rate on a doppler which was always a comfort.

22 Weeks and 1 Day 

Around 6 PM on a Wednesday Fi yelled for me from the bedroom and quickly said she'd just had a large bleed. She was in obvious shock and we knew she needed to get to the hospital. She tried ringing our midwife then sent her a message to say we'd be at the hospital when she couldn't get her. I gathered up our stuff and our flatmate drove us to the hospital.

Arriving at the hospital we ran into a Covid related complication as the after hours entrances had just changed how they were handling the visitors and shuttled us back and forth between multiple entrances before eventually letting us into the first one we'd gone to. Luckily in our case it didn't end up mattering, but it really highlighted how directly the need to respond to covid had directly affected other health provisions.

Once inside, we were found a bed in the delivery suite and our midwife came in to do an initial search for a heartbeat with a doppler. The tense seconds while she tried to find a heartbeat followed by the immense sense of relief when she found it coming through quick and strong is unlike any other experience I've had. 

Over the next few hours doctors and midwives came through steadily with various examinations, antibiotics and theories about what could be happening. One of the front-running theories was that Fiona's waters had broken but it could also have just been another hematoma. The prospect of broken waters was especially scary as in most cases labour will begin within 72 hours of waters breaking early and at 22 weeks and 1 day the chance of having a successful delivery is extremely low(Although with progression in medicine no longer exactly 0)

One poor midwife who had the unenviable task of taking rather a lot of blood got very worried when Fi went very pale and flopped backwards onto the bed during the test. Fi had always hated blood tests and the extra stress very nearly lead to her fainting when they were putting a line in.

Somewhere in the course of this process we were officially admitted and Fi was issued a patient wristband. Records show 9:53 pm as the time this occurred, but we’d been in the hospital for at least a couple of hours by that point. Eventually, as everything seemed stable they left us to sleep for a bit before waking us at 6AM to say they needed the room as a dozen women had all shown up in labour at the same time.

22 Weeks and 2 Days

After being woken up we were moved down to the Ante-Natal ward, a place we would become very familiar with over the coming weeks. Fi was given a bed in a room with one other and various followup tests were booked including more ultrasounds and further blood tests.

We also started to get numbers and ideas about potential outcomes at this point. Most of the time people think of of gestational age in weeks but the difference between 22 weeks and 24 weeks in terms of birth outcomes is nearly 50%. Not 50% in the sense of a 50% improvment but 50% in terms of going from a near 0% chance of survivial to 50%. If the baby had come on day one of our stay our chances would have been at the level of winning the lottery and only 2 weeks later we would be flipping a coin.

23 Weeks

We actually got to go home for a couple of days in the weekend with instructions to come back immediately if anything happened and to come back on Monday with anything Fi would need if tests showed enough areas of concern that they'd want her to move into the hospital. We were also still in heightened alert levels so while extra freedom was good it didn't open up  a window to see people one last time.

Monday rolled around and the tests reinforced that Fi's waters were mostly likely broken and the medical recommendation was that Fi spend the remainder of her pregnancy in hospital. At that point the doctor's really focussed on a one foot in front of the other approach and clearly believed that we would be doing well to make it to 30 weeks(one of the big cut off points where long term outcomes start getting close to full term outcomes)  

The next few days we started settling into the hospital while dealing with the challenges of hospital lockdown from covid still being in effect so I needed to spend a lot of time in the hospital both for the normal level of supporting Fi and to cover for her not really being allowed visitors. 

23 Weeks and 6 Days

At 23 weeks and 6 days Fi's infection markers started going up alongside a slight temperature. With her waters broken any infection would be extremely dangerous, the doctor's were concerned enough that we were taken down to the delivery suite and briefed on scenarios. 

If the infection didn't respond quickly to antibiotics then they would recommend delivery and while the odds at 23 and 6 were starting to increase they weren't good and there were two different numbers to track. Both the chance that a baby would come out alive and how badly damaged it might be from what it would take to keep it alive. While the earlier discussion of how far we might go to keep a baby alive seemed distant, in the waiting room of delivery suite the numbers suddenly got much more real. All we could do was make some basic decisions and hope the infection markers went back down.

Making the evening even more tense was the knowledge that 24 weeks was a significant cutoff in policy around approach to delivery. At 24 weeks the team would equally balance there treatment to achieve the best balance of outcomes for mother and child, while at 23 weeks and 6 days the balance was kept firmly on the mother. They'd still try and save the baby but with a set of surgical decisions that further decreased the odds of success. In an already stressful situation it's very weird to then have an extra reason to watch the hours tick by with the knowledge that every hour is changing both the actual health situation as well as the policies that will affect the outcomes.

Luckily, as the night wore on, it became clear that the antibiotics being pumped into Fi were doing their job and her infection markers stabilised.

The next day we were trundled back down to the antenatal ward to return to our previously scheduled waiting.

28 Weeks

By 28 weeks Fi had been in hospital for nearly six weeks and we'd settled into something of a routine. I was there daily and often took a many of my meetings from the hospital while on other days I got there a bit later and then quietly stayed in Fi's room until we started getting hints from the midwife's that maybe visiting hours had finished an hour ago and they'd need to stop turning a blind eye to my presence sometime soon.

Somewhere around this point the covid related visiting restrictions also started to ease up which was a huge boon as more people started dropping by both to help Fi keep sane and also to deliver various snacks(Snacks are a high value commodity in Wellington hospital ever since a change in "healthy eating" policy lead to the removal of vending machines from most of the grounds).

(“Meatballs with seasonal vegetables”. Some dishes were quite a bit better than this but plenty were worse as well.)

30 Weeks

30 Weeks was a big milestone as by this point most numbers said that our long term outcomes were nearly the same as a full term baby. 

Our biggest ongoing worry was still around his lung development as the lowered amniotic fluid could be hampering that development. Fi had also been leaking a bit more so ultrasounds showed less fluid available but luckily the baby was managing to sit in a way that kept his mouth in the fluid to keep breathing it in and developing his lungs.

We'd also thoroughly adapted to a hospital based routine at this point - where earlier we were feeling the pressure of responding to events and being worried about each day, now we were ticking along. In some ways this was more challenging as it left more time for boredom and frustration to set in. One bright side was that Fi had got so used to her regular blood tests that instead of nearly fainting in response she was now carrying on work calls while the phlebotomist wheeled in their trolley.


32 Weeks and 1 Day

At 32 weeks Fi started feeling a bit sick and the doctors did an extra round of bloodtests. The first day they saw some infection markers going up but decided to hold off on any major decisions, overnight Fi was fine but the next day the markers were up again and Fi wasn't feeling so hot.

As the day progressed Fi was asked to fast "just in case" which progressed to, "probably" the baby needs to come out, and then to "Yes you'll be going to delivery suite tonight". From the time that everything went from keeping a watching brief to us getting shuffled down to delivery suite there was probably only 2 hours in which I quickly finished doing things like the day's payroll and Fi emailed her boss to say she wouldn't actually be dialling into any meetings tomorrow.

As always with hospitals we then had a good few rounds of hurry up and wait as some more drastic emergencies bumped us down the surgery list. What had originally been a 8pm slot came and went with some information that we'd be soon. Eventually at around midnight our slot came up and we wheeled down to the theater. The c-section itself took less than 7 minutes from the first cut to the baby being out and in the corner with his own team to look after him(At peak there were about 15 people in the room covering both the team looking after Fi and the team for the baby). 

The team looking after the baby immediately started working on supporting his breathing(We only found out in his discharge notes how bad a condition his lungs had actually been in) while the surgical team started putting Fi's insides back together.

Once they'd completed their immediate work it was time to wheel Finlay(We'd finalised his name in the operating theatre when Fi looked over at me and said "What do you think, does he look like a Finlay?") down to the NICU.

The NICU is a relatively busy place even at 1 in the morning with both a very high nurse to baby ratio and a pretty steady stream of parents who are still there or have come in to drop off milk or breastfeed if their baby is old enough. Not that you notice when you're carefully helping to wheel in your own tiny child though.

I stayed with Finlay until he was settled in and had all his monitoring ticking along at a consistent level he seemed both astonishingly tiny and not since he was sharing a room with babies that were half his size again(He'd come out weighing 2.52 kg which is big for a 32 weeker and also big for the higher risk room that he started his NICU journey in). That first night he had: 4 monitoring wires, 2 iv's, a breathing mask, a feeding tube, goggles and a bright blue lamp to help with jaundice. Many of our small celebrations over the coming weeks would be each time one of those got removed.

By the time I got back to delivery suite Fi had finished being stitched back up and was sucking on an iceblock while automated massaging pillows slowly pumped up and down on her legs.

33 Weeks

The first few days in NICU were something of a blur. Finlay looked tiny and was surrounded by so many wires that just touching him seemed scary. We had to adjust to the constant beeping and frequent alerts that popped up on our screens and the screens around us. 

Most concerning for us was when his heart rate and blood oxygen would suddenly drop. A nurse would immediately come over and fiddle with the oxygen dials but it took a while to become used to seeing the numbers suddenly start to drop(They would regularly drop as the goal was always to steadily reduce his dependance on oxygen for which the main strategy was lowering the extra oxygen he was receiving and seeing if he was still getting enough). 

While the NICU experience was stressful in its own right it was a lot less stressful than the experience of having Fi in the hospital and not knowing what would happen. The biggest remaining risk had been birth and getting through that put us on a much more stable path as the days started to add up and Fi managed to come home.

34 Weeks

The next few weeks we were visiting the NICU constantly but also didn't have much to do when we were there. A premature baby should still be in the womb so they're still mostly asleep, don't make a lot of noise, and don't really interact(although they can do the finger grabbing thing). 

We learned to interpret the large charts that were kept next to the incubator to understand how much he was eating, how much he was growing, and if anything concerning had happened between visits.

From here it was a steady series of improvements with the two biggest goals for getting him home being no longer needing breathing support, and his feeding and growth being far enough along to safely feed him at home. The breathing was a steady series of improvements as he went from full mask to tubes, to little nostril pipes and we could also check the dials each day for how much supplemental oxygen and pressure he was needing each day. 

Feeding felt like it took a lot longer to progress as he stayed dependent on the tube for all his feeds for weeks and also had the most difficulty breathing during feeds. Luckily he was managing to eat a lot despite these challenges so his growth was steady and doctors were confident his eating would come right eventually.

37 Weeks and 6 Days

With Finlay's health improving we started to prepare for the end of his stay in the NICU. One of the final activities was "rooming in '' a process where parents and baby get a room to themselves to adapt to childcare and taking over cares(cares has a unique meaning in NICU to cover all of the regular activities that happen on a regular cycle as part of taking care of the baby such as: wiping the eyes since prem babies don’t have their tear ducts going yet, wiping the face, nappy changes, temperature checks etc) while still being checked on regularly by nurses and with help on immediate hand if anything goes wrong.

Initially, our goal for this week was to get completely off the feeding tube and be able to go home without it. Unfortunately, after a couple of distressing 2am marathons trying to get him to do his night feeds under his own power, it became clear he was still a few days away from not needing the tube. Happily for us the nurses felt we'd gained enough skill at managing a feeding tube that we could take him home with it still in.

38 Weeks and 4 Days

At 38 weeks and 4 days, after essentially 16 weeks of being tethered to the hospital we got to take Finlay home. He was making good progress on growth and although we did take him home with the feeding tube(and needed it the first couple of nights) he managed to transition to normal feeds within a week.

40 Weeks

By the time Finlay's original due date came along he'd been out of the womb for nearly 8 weeks. But it had been a different kind of experience, as while he'd started interacting in some ways he was only just finishing off a lot of the development that should have been happening within the womb. 

People asked about things like his affect on sleep or keeping us up but in reality he only started being able to make a level of noise that wake up whichever parent wasn't with him once he reached about 40 weeks. While most people tracked their child on a growth curve we essentially had three different ones:

  •     His age since birth - which was a good track of some types of development like neck strength which had improved as soon as he was out of the womb and needed to use his muscles to lift his head.
  •     His corrected gestational age - i.e. the age he would have been if he'd gone to full term. Which was a good indicator of many of his more mental milestones and things like sleep.
  •      A messy number somewhere between the other two ages that over time seemed to be what everything was averaging out in to. This was a good guide on things like weight where his CGA weight was extremely high and his weight for his age since birth was quite low. It also seemed to be where his milestones were slowly trending towards the longer he was out in the world. 

46 Weeks

At 46 weeks Finlay's hospital checkup included the words "You couldn't even tell he was prem". 


There are a lot of people to thank for seeing us through this whole thing:

Our Midwife Holly who was amazingly supportive throughout. (If you need a midwife in Wellington, find her here)

The team at Wellington Hospital in both antenatal and NICU

The neonatal trust who were supportive throughout the journey

The team at Ackama who covered for me being a less attentive CEO at a time that they could really have done with a lot more of my attention rather than less

Fi’s work for making it easy for her to keep working while trapped in the hospital and being flexible throughout

Our friends and family

Fiona who had it way tougher than I did

Finlay just for existing really

Sunday, December 27, 2020

Changing the NZ Economy Post Covid

 After the initial shock of Covid-19, New Zealand can now focus on how we want our industries to develop and what the future holds. We can be purposeful in shaping the work and industries we want to have as a country, or we can just keep reacting to crises as they emerge. If we wait until the crisis has finished to think about changing our economy we will have lost the momentum to make changes and the opportunity to benefit from being ahead of the rest of the world on the recovery.

In any discussion like this, the first step is to discuss what a successful New Zealand economy looks like. I suggest the following basic outcomes:

  • Food Security - Separately to any discussions of the productivity of our agricultural industry it is important that in situations like Covid-19 we can react quickly to produce enough food to keep the country running. Being at the end of supply chains makes this more important for us than many other countries.

  • Productivity - That for every hour worked we should produce as much value as possible. We can achieve this by making work we’re already doing more efficient or by favouring getting people involved in areas that are more productive. The exact measurement of productivity has some complex edge cases around the potential measurement of work that isn’t captured within industry measures, but the historic case has been that higher measured productivity leads to additional capacity for non-billable activities.

  • Poverty Alleviation - A high performing economy can ease poverty both by employing more people and having more funds available for social welfare. I think we should assume that as New Zealand grows, we will continue to tax top earners and look towards more company tax from NZ businesses, and then spend a portion of that tax on welfare in line with that growth. 

  • Inclusiveness - As we review industries, paths to employment, and paths to wealth, we should make sure we keep helping people up. We could meet the conditions of food security, productivity, and poverty alleviation by having a wealthy upper class that funded a generous welfare scheme for everyone else but that isn’t an acceptable outcome in terms of the long-term social consequences as work like Michael Marmot’s research into the ongoing health effects of high social inequality shows.

  • Environment - Environmental outcomes and protection are a key consideration in any policy we create. It makes sense to create and grow industries now that are better prepared for a future where environmental concerns have become even more important than they are today.

  • Long Term Planning - Economic and social changes happen over decades. Many of the most impactful social programs (schooling, healthcare etc) take upwards of twenty years for New Zealand to fully benefit from improvements.  China has a 100 year plan; Grant Robertson said that Covid-19 was a once in a 100 year shock - on a ten year plan we might say it’s only a 10% risk and not think too hard about preparing, but on a hundred year plan we’d assume there’d be at least one and that might change our preparation.

  • Maintain and grow our international status - New Zealand is well respected internationally and our strongest growth opportunities rely both on export and having uninterrupted access to offshore markets. This means signing healthy trade agreements that support all of our industries (both current and future) while maintaining our ability to take principled stances on social and political issues that matter to us.

With these goals in mind, there are plenty of changes we could make now to improve our position in the future. For now I’ll focus on those around business in New Zealand but there is potential in every area. 

What Does a Good Business Look Like?

Having outlined a general picture of what good looks like for New Zealand at a large scale I think it helps to also be clear on what good means in the case of business. By doing this we start to dig into a little more detail which can then lead to a conversation about the direct actions and approaches that the government should take with business. 

There’s been a lot of good thought in recent years about the future of business when it comes to concepts like the triple bottom line or corporate social responsibility. The focus for a country in setting policy around business is, however,  a more complex puzzle as minor changes can dramatically change which industries grow and which shrink. There can be sudden pressures to favour certain industries whether that be roading under certain governments or a fixation on a shiny new technology as we see occasionally when ideas like blockchain or AI are at the peak of hype cycles. What is needed is a stronger theory of the kind of business the government should encourage based on the long term outcomes for New Zealand.

I suggest the following criteria for judging whether a business is good for New Zealand (Or any country):

  • The creation of new high wage jobs - This covers both that new jobs increase the productivity of New Zealand and also that they don’t just hire people who are already earning well in the industry. To quantify, in 20181 the median salary in Aotearoa was $49,868 vs the median salary in the digital technology sector of $82,000. 

  •  There is a strategy to bring a diverse group of people into that business or industry - This is a joint responsibility with the government but even if an industry currently has a poor record on diversity there should be a plan to improve that situation.

  • That the  business and industry around it will grow - Many of our most successful growth stories are important not just because of the particular businesses that lead the way but because entire industry areas have sprung up around them. For example, Xero has directly lead to dozens of businesses being created and become a key channel for many New Zealand software businesses to sell internationally without having to grow to that scale. On the flipside of this Stretchsense and Rakon have both shown the risks of having some cutting edge tech but being in industries that have not achieved critical mass in New Zealand as sudden changes in other markets are both more difficult to react to and more likely to catch participants off guard.

  • That taxes are paid by the business appropriately and in the countries where the business trading - There are some challenges here but the future of taxation must be cooperation with our key trading partners to divide taxes appropriately and jointly favour businesses that are good tax citizens of all the countries in which they trade.

  • Economic Sustainability - We should encourage businesses that will exist for the long term if they succeed. This isn’t to limit ourselves to sure bets but that businesses should have an intention to exist for the long term. While there are totally valid short term businesses such as entertainment joint ventures the focus of “business” policy should be on growing businesses that aim to exist for the long term.

  • Environmental Sustainability - We should favour businesses with better environmental outcomes than not.

  • The broader community will see the benefits of success - It is much better in the long run for New Zealand to grow businesses that continue to operate, create jobs, and pay taxes than for a single founder to see a sudden windfall and the business to disappear - some people suggest that big paydays still benefit the local community through investment, but I’ve yet to meet the wealth manager that recommends a locally focussed investment strategy over an internationally diversified one so while there can be a benefit I would argue it’s not as big as some people would like to believe. This is particularly challenging as NZ entrepreneurs tend to sell or stop growing their business at a smaller size than some of our other trading partners.

1: Source “Digital Skills for a Digital Nation Report”, Digital Skills Forum.

Supporting the Future of NZ Businesses

Tax Settings to Support Business Growth

Tax settings should support businesses that continue to invest in New Zealand and create New Zealand based jobs. That means favouring taxes that trigger when cash is removed from businesses rather than taxing the day to day running of a business. For example, favouring personal income taxes on high earners over company income taxes or wealth taxes. 

For an illustration of why this is important, look at the surprise from many commentators when it came to how quickly small businesses found themselves short of cash under Covid-19. Part of the reason for this is if you have a growing business you could either build up your cash reserve and then hire additional staff or just hire additional staff immediately. High company income tax is a disincentive to building up healthy cash reserves as you’ll have to pay tax immediately on the “profits” while pouring the money immediately back into more staff won’t be realised as a profit. 

This graph shows the difference in employee count after  20 quarters or 5 years between a small services business that decides to only hire employees once it has 90 days of cash reserves to meet in a company tax versus no company tax environment (assuming that an employee costs about $100,000 a year and generates $120,000 revenue and the business starts with $10,000 and a founder that works until there is enough cash to start hiring).

This means that the effect of paying company tax is the difference between a small business with 4 employees and a business with 10 - a sizable difference in overall business and tax take. While the smaller business will have generated an extra $43,000 in company profit tax, the company that could accrue capital without paying it out in tax will have created jobs with a minimum income tax component $217,000 higher than the smaller business.  These are also both good businesses in that they’re holding responsible amounts of cash to cover downturns and providing high-paying jobs. For an even more extreme example a business modeled on the same assumptions that keeps winning work but decides to hire as soon as it can cover the next salary rather than holding a cash reserve could theoretically reach 400 employees in the same time frame, although a stiff breeze would put it at risk of falling over. (Note: Singapore achieves a similar outcome by issuing a plethora of tax credits to growth businesses rather than a blanket allowance.)

This isn’t an argument against tax but an argument that we should target taxes at money moving out of the business(whether to a shareholder or to an offshore parent)  rather than at cash being used to grow the business.  Better taxes include: personal income tax, fringe benefit taxes, dividend taxes, and capital gains taxes. All of which time the taxation to the point that the funds are being taken out of the business and no longer being used for growth.

Making early phases of starting a business more efficient is also a key component of making business more equitable. As those from more privileged backgrounds are more likely to receive an early investment of “friends and family” capital while those from less privileged backgrounds must slog it out until they reach the investment criteria of external investors or qualify for debt finance.

Employee Share Schemes

Employee share schemes are great for spreading the eventual benefits of success in a business around more people as well as giving employees some extra insight into the business through shareholder rights. In cases where a business becomes extremely successful, they also help create a community of people who become active in supporting other businesses and investing. A very successful business making one person a billionaire seems a lot worse for New Zealand than the same business making 100 people have 10 million dollars as the second one will lead to a much more diverse set of follow on investments and choices being made. 

Unfortunately, New Zealand has done a disappointing job of employee share schemes as apart from a small $5,000 dollar a year carve out employees will be taxed on an employee share scheme when they are issued shares. Which might sound okay except that startup shares are generally illiquid (no one will actually buy them from you) and extremely volatile in value (they could go up a lot but they also have a greater than 50% chance of being worth $0). By taxing at issue we disincentivise using stock as a significant portion of employee compensation which misses a splendid opportunity to spread risk and reward across businesses. In comparison, in the US, where people talk about the high salaries of software engineers, companies like google are often paying 40% of those packages in company stock rather than cash.  

Government Procurement 

Government is a key client of many NZ businesses and a careful approach to procurement can deliver better outcomes for all of New Zealand in terms of both better outcomes and secondary economic effects of funneling money back into the local economy. Unfortunately, New Zealand has traditionally feared being seen to favour bids from New Zealand businesses on the basis that it might run afoul of trade deals. This is cowardice and contrary to what most countries do, in terms of local purchasing preferences. 

The Labour Government has introduced minor changes to the rules of sourcing in this term, many lack teeth and as a sector we are yet to see the resulting changes in capability or behaviour from government agencies as buyers. 

Many countries have succeeded with strategies to make sure work paid for by the government benefits the local economy as much as possible without running afoul of trade laws. Common provisions in other countries provisions include:

  • Weighting economic benefits, particularly local employment, as an outcome of a project.

  • Structuring projects in a way appealing to local businesses. Such as building a smaller solution that is exactly what the problem needs rather than buying a large generic solution, or breaking a problem up into smaller pieces that suit local providers but multinationals might consider “too small”.

  • Requirements for involvement with local indigenous peoples.

  • Requiring high levels of staff availability both during the project and for support afterwards.

  • Tax compliance and regulation so that businesses are incentivized to employ locally or have to payout a larger portion of their earnings back to the government in tax.

  • Encouraging the capture or sharing of new intellectual property generated through a project either through open source licensing or by requiring local ownership (this can include a multinational’s local office owning the IP but making it clear that in that case they’re expected to pay tax in the country where the IP was developed based on fees it might generate or the revenue generated by “selling” it back to the parent).

Create a more cohesive approach to long term investment in New Zealand

Whenever decisions are made about investment by the government there is a key challenge in comparing different projects and investment opportunities. One of our challenges is that we don’t do a good job of comparing investment in different areas and really focussing on the long-term outcomes and potential for a changing world to materially change which investments will be the most valuable.

To give an example, the government views investment in roads and software differently. But, as we have seen during lockdown, working from home reduces the load on core infrastructure dramatically.  A key question we should ask is “What needs to happen for more remote working to happen across the country?”. This includes both working from home and incentives towards regional offices to take the load off Auckland. 

I believe a change in the government approach to view many large technology projects as more in line with roads and less in line with building a website will better reflect both the longevity of many of these systems and the costs in maintaining them. To give an idea of the kinds of projects I imagine in this space (some of which are already in train):

  • Completing work on bringing digital identity standards and capabilities up to both an appropriate level of access and ease of use for all New Zealanders to interact directly with government services.

  • Eradicate paper forms and replace them with appropriate digital approaches across all levels of government. This especially is a needed step for many government functions we would like to improve with technology in the future - the latest newfangled AI system is not much use if big chunks of information don’t exist in a machine-readable format.

  • Make interaction with government through online systems easier and better than working with them in person. For instance, someone on a benefit should be able to complete all of their required activities online including everything from signing up for a benefit through to job seeking and training. This experience should be so much better than going to an MSD office that it serves as a motivation to sign up for the required digital identification.

  • Business intelligence and analysis should be flexible and easy to manage across departments. Over time the approach to storing both data about government actions and the rules  and regulations it follows should allow for not just easy interoperability but also a complete programmatic simulation of as much of the overall economy as possible. For instance, if the government were considering a change in benefits, that change should not just be modelled in a spreadsheet but simulated against the actual data of earning levels in New Zealand at the time. This is especially important as we become more aware of the negative effects of inequality - with a simulation we are much more likely to detect when a suggested change will create outliers (either people unfairly harmed by a policy or people given too much advantage) than with a distribution based model.

  • Key service areas should have cohesive overarching digital strategies. For instance, health should have a single easily connected patient record database with data controls, and inefficiencies, such as ongoing reliance on faxes, must be eradicated.

  • Technology and digital record keeping should be empowered to become a key part of tracking and managing the results of long term social investment in areas like education and healthcare.

  • Investment should enhance digital systems for maintaining privacy, limiting the impacts of data breaches and providing dynamic controls over personally identifiable information.

Support R&D and commercialisation more broadly and systematically

New R&D and product development is one of the best ways for New Zealand as the returns and growth in jobs can be large (consider how many high-wage jobs one Xero adds to the economy let alone any of the benefits from the success of the business for shareholders). Unfortunately, at the moment, many of our policy settings don’t support the long view of R&D that could lead to really capturing the benefits.

The current R&D tax credit still refers to novelty or “newness” as part of the test of whether something counts as true R&D which effectively reads as excluding most software based innovation. This thin view of R&D raises several issues and possible responses:

  • Many excellent ideas are the application of existing approaches to different problems - Xero was not a technically difficult idea. It was a great idea at the right time, but if you’d found a good developer and described what Xero needed to do, they wouldn’t have told you it was pushing the boundaries of human knowledge which seems to be what the current tax credit suggests should be the case.  We should absolutely be supporting businesses to not just research, but also apply that research into services and thriving industry.

  • Without ongoing support of research through to commercialisation, New Zealand is unlikely to see the bulk of the returns on R&D - Any piece of research is a long drawn-out process, but even more difficult is the next step of market research and commercialisation. Because we define the research phase so narrowly, we too often see good early stage ideas or businesses being sold to larger players at a cheap price rather than the potentially larger businesses accruing their benefits to New Zealand. 

  • By incentivising complexity rather than results we don’t “fail fast” - In startups it has become standard to fail-fast. Or in plainer terms to stop doing things that aren’t working sooner rather than later. When our main categorisation for R&D is being globally “new”, we reward complexity rather than results. Bad early stage ideas receive ongoing R&D funding because no one involved in reviewing them understands them well enough to say they aren’t good R&D. A good example of this in recent years has been the propensity of startups that really didn’t need a blockchain adding a mention of blockchain to their R&D programs because it made it seem more “novel”.

  • Create clearer educational pathways to R&D - One of the challenges with universities responding to a focus on preparing people for the workforce is that R&D as a capability doesn’t match up nicely to a career path and is generally better served by the more traditional academic pathways. This is another benefit to reinforcing the role of vocational learning for those who do want clear career paths so that those who want to be on a research path are not so heavily tied to courses within universities that are steadily trending towards job readiness.

  • Without broad access to funding and support, entrepreneurship will exacerbate rather than close social divides - One of the key challenges when looking at entrepreneurship as a social level is that starting a company is a really really terrible idea for the founder. Anyone who has the skills to found a business could competently do a much more stable job that produces a stable income, so entrepreneurs (and particularly “growth” entrepreneurs) will disproportionately be from backgrounds that are already well-off. R&D funding comes into this as well since a simpler and more broadly applicable fund is more likely to support people at the right time.

Growing capital in New Zealand

Wealth is security. While it is commonly noted that money doesn’t buy happiness it’s nearly always followed up with the note that the lack of it surely brings unhappiness. New Zealand needs a wealth strategy for the long term. While we have strong individual wealth in New Zealand a disturbingly large proportion of that is based on our eye-wateringly high property prices (39% of household net worth currently being property). 

We have been very lucky that the NZ Super Fund has performed as well as it has over the last few years and Kiwisaver is building up the balances of many New Zealanders to help mitigate the challenges of an aging population. But that’s only one of the many challenges we can expect over the next 100 years, whether it’s global warming, changes in agriculture, disease, or sudden shocks in the global economy - we should expect constant change, and we should expect at least some of those shocks to be worse than any we’ve experienced so far - A resilient New Zealand is not just one with a functioning economy but one that can handle a non-functional economy for as long as possible. 

We need to have a plan for there to be enough capital in New Zealand to allow us to maintain our position globally and not become a dependent state. That doesn’t mean it all has to be private wealth, state owned capital counts, but if successive governments alternate between selling off state assets and discentivising private wealth, then the end result will be no one in New Zealand having any money while states that can leverage their wealth slowly pressure us either financially or politically. Consider the current challenge between the fact that of our major trading partners only China has managed to hold steady financially during Covid while the US is pressuring us to ban Huawei as a supplier. Protecting our independence requires that we maintain relatively high levels of wealth, especially as aggressive financial pressure becomes more accepted as a modern approach to diplomacy. 

In 2013, Piketty’s2 book about the growth of wealth inequality outlined the challenges presented by the wealthiest people reaching the point that their wealth generates income at a pace that will steadily increase wealth inequality. This same pattern of wealth inequality will also apply between countries as much as it does between individuals. If New Zealand does not act to encourage the accumulation of wealth inside of New Zealand then for all our good intentions we are at serious risk of creating a country where everyone is more equal internally but we have fallen behind the rest of the world. 

Piketty’s suggestion of a global wealth tax might work if there were ever the global motivation to do so. But a national wealth tax as suggested by the Greens without alignment with the rest of the world would create another disincentive to the local accumulation of wealth. In some countries that might not be such a problem, but in New Zealand we already have difficulty incentivising and building the businesses that will make New Zealand wealthier in the long run. 

2 Source: “Capital in the Twenty-First Century” by Thomas Piketty.


Financial Literacy

Many would expect digital literacy to go first in a list of challenges in this list. But I have been consistently shocked by how weak the level of financial knowledge in New Zealand is across the board. This ranges from people’s ability to understand investment or long term effects of their choices through to business owners with weak understanding of their own balance sheets. 

While there is plenty of support for business owners on the entrepreneurship front it constantly surprises me how modern tools like Xero mixed with accountants that happily take care of the day to day financial reporting of a business have made it possible for people to not have a firm grasp on the financial position of their business while mostly being able to carry on trading. Improving financial literacy across the board is to my mind a key part of improving the proportion of attempts at entrepreneurship that are actually successful.

Separately, growing businesses depend on their staff having strong financial literacy. To take an earlier example employee share schemes are only valuable if the people you’ll offer shares to understand what shares are and how they work. Even more importantly, growing businesses rely on being able to hire staff into management roles, from my experience one of the key challenges to hiring for these roles in New Zealand is a relatively low level of base financial acumen even among professionals within New Zealand. 

Digital Literacy

Digital Literacy is much more lacking in New Zealand than most people realise. I include in this topic everything from basic usage of computers and the internet through to an understanding of how systems work in whatever industry someone is part of. Separate strategies are needed across multiple fronts to improve digital literacy across society. Some key groups include:

  • Those Suffering from the Digital Divide  - There’s a lot of work happening here which I won’t relitigate in a bullet point but it remains deeply important.

  • Government Officials - Many government officials still need additional training to become confident around technology to the degree that is necessary in their roles. This often leads to risk averse choices that have worse long term consequences than a risk aware choice would have led to.

  • Governance Professionals - Boards in New Zealand still frequently lack technology expertise or have only a single “tech-savvy” board member. It’s my view that future boards should treat digital literacy more like finance in that all board members should be expected to have basic capabilities and one or more specialists may also be on the board if necessary. The technology sector changes so fast that there is never a single “correct” answer so enough people around the board  table need to be confident enough about technology to create discussion.

  • Older Generations - A key part of getting the greatest savings from moving to digital solutions across government is in slowly turning off non-digital solutions. That means we need to provide the right training and access to take people who’ve got used to those processes along with us to the newer approaches. 

  • Younger Generations -  Many people assume that younger generations are automatically tech savvy; however, this is steadily becoming less true as modern devices hide more of their internal workings and the algorithms behind them become less intuitive so young people now have less opportunities to understand how the systems they use work. This becomes even more critical as they become more politically active while not able to make strong judgements about what’s actually happening around them versus what’s projected to them by the systems they use.

Vocational education pathways into high-wage industries 

At the moment there are plenty of careers where the default study path is university but vocational approaches would also be suitable. For example, at Ackama we’ve hired a mixture of people that have done everything from 3 month programming bootcamps to PhD’s in computer science. On balance, we need some people with deep computer science backgrounds when we hit tricky problems but a good chunk of our work is just not that complex. Most modern startups should focus on delivering the simplest solution to a particular customer problem before investing time in making that solution particularly efficient.

There’s a lot of discussion currently going on in this front for tech. I believe there are three key components:

  • Short Entry Courses - Enspiral Dev Academy for instance provide an excellent 3-6 month course that get people up to the skill level necessary to start as a developer.

  • Employer Incentives - In any vocational model there is a longer period when someone first joins the industry that they are a net cost to the employer, potential answers here include: training wages, government subsidies, and minimum contract lengths.

  • Ongoing Training and Microcredentials - One of our observations of developers coming through Dev Academy or other shorter courses is that some of the content that is left out in comparison to a university course becomes needed later on in their career. A new web developer doesn’t really need to know advanced algorithms and data structures when they join the industry but they would really benefit from that knowledge once they’re trying to become a senior developer and run their own projects. The most motivated people can pick it up over time from books and other training sources but a more complete pathway would be immensely helpful.

Where next?

The tricky thing is to decide what to do next. This post is already long and in no way an exhaustive list. So you might ask, “What should we do first?” Unfortunately, the answer is everything all at once and as fast as possible.

All of these areas I’ve talked about depend on each other. Employers need customers like the government to grow, people need employers to employ them, employers need those people to have the skills to do the work in front of them, and everyone needs the country they’re a part of to be secure and stable.

It would be easy to place this in the “too hard basket” but the reality is the global and domestic impacts of COVID require the private sector and government to work together. We need to break this down into a series of intertwined and interdependent parts, establish a working group to focus on changing the NZ economy so we can adapt rapidly, leveraging our strengths in this new world.