New Zealanders spend too much time trying to reinvent the wheel. To raise national income, a sharper focus on weightless exports is needed that calls for active mining of the vast web of knowledge already in place.
For New Zealand to retain a first-world standard of living it must earn substantially more from exports. Yet despite government rhetoric about focusing on economic development we have no substantive national strategy to lift our economic performance; no game plan to grow our export revenues. It’s an indictment on the current and previous administrations.
Politicians are unwilling to make the bold moves required to match their aspirations, whether getting into the top half of the OECD or catching up with Australia.
The previous administration created a Growth and Innovation Framework identifying four areas from which growth was to be delivered, but they lacked both a strategy with which to make the growth a reality and the courage to invest in making it happen. The current administration has even less, although we have seen a ray of hope, albeit rather ad hoc.
The desire to establish Superannuation Fund Administration services as a New Zealand export is a step in the right direction - provided we don’t have to amend our legislation to make us look like a tax haven. Such services are low-hanging fruit in the global market for weightless products.
RAISING OUR INCOME
There are three ways in which New Zealand can realistically earn an income from exporting: the traditional route, commodities; creating added value products from commodities; and creating and selling weightless goods. The viability of manufacturing is governed by low labour cost, high capital cost and low distribution cost, which don’t favour New Zealand.
Weightless products are those for which the cost of delivering it to the consumer is marginal compared to the value of the product. Just being weightless is not attractive in itself. Call centre services are driven largely off low labour cost, not something we should aspire to. Likewise the services that support the tourism sector are largely low wage.
Super Fund Administration services are a step in the right direction, but they only scratch the surface in terms of adding value. Real added value comes from exploiting knowledge.
The words “knowledge is power” sprang from the distribution of knowledge following the introduction of the printing press. It is just as true today, especially with the introduction of the internet. Yet few have figured out how to harness the value of existing knowledge. We prefer to reinvent things, to rediscover knowledge, an expensive process compared to mining existing knowledge from the web.
MINING KNOWLEDGE
The EU estimates that “up to 30% of all expenditure in R&D is wasted on redeveloping existing inventions”. In the same vein the US Patent and Trademark Office estimates that 99.8% of patents have no commercial value. Millions of dollars are wasted on patenting alone, let alone the billions in associated R&D costs. The same applies to New Zealand. Anecdotal evidence shows hundreds of millions of dollars being lost due to reinvention in both private and public sector R&D.
Let’s stop wasting money reinventing knowledge and instead mine existing knowledge to the advantage of New Zealand business. The cost of mining knowledge is way less than the cost of reinvention.
Indeed, mining knowledge offers New Zealand a potential new business opportunity, one first suggested by an official at the UK Intellectual Property Office. Instead of paying people to reinvent things, we could become knowledge mining experts, finding existing knowledge to solve specific problems. Just finding knowledge for patent searches would be a start.
MYTH-BUSTERS
There is a belief that we must develop our own intellectual property, acquire our own knowledge. Yet it is the application of knowledge that creates wealth, not the discovery of knowledge. Kiwis are good at application. They are generalists, with an all-round grasp of problems, compared to the specialists in the silo business structures of the US.
Another myth is that a patent secures ownership of your intellectual property (IP), when in fact it merely records that you have registered your IP. It does not guarantee that you are not infringing someone else’s patent or that your knowledge has not been previously published and so open for anyone to use, as is frequently the case.
Apple did not invent the iPod. It only discovered this when it was sued by a US patent troll for infringement. A search uncovered an earlier patent for an identical device. The iPod was in the public domain and the troll’s patents worthless. Apple was saved.
The intriguing aspect of this story is that the IP for the iPod was on the web, for anyone to find and exploit – without incurring the R&D costs that Apple had to invest. Anecdotal evidence suggests that New Zealand could have saved millions of dollars by first mining the web for knowledge to support an “idea”, rather than spending money, time and effort on R&D, reinventing or rediscovering what is already known.
The web is a mine of knowledge just waiting to be turned into applications and exported.