The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Saturday, November 28, 2009

Wasted Turnbull Talent (updated)

Well, it is with a heavy heart that I sit down at the keyboard and punch out these thoughts. I don’t consider myself politically partisan and, frankly speaking, thought Kevin Rudd was an entirely justifiable selection at the last election.

I had always been impressed with the seemingly dispassionate, surgical and thoughtful manner in which Rudd carried himself. While I am a political troglodyte, Rudd struck me as being very different to his peers, which I thought was not a bad thing. And notwithstanding all of the highly personalised rhetoric about Rudd that you hear from the other side, which I think is a grave mistake on the part of those projecting such statements, he’s actually done a pretty good job in many respects.

As I’ve said before, the thing I respect most about Rudd is his ability to make decisions. Having founded a very complex, unusual and in many ways unprecedented business, one of the things I quickly learnt about life is that all the surface-level trimmings that consume so much of our attention are largely irrelevant. It does not matter, for instance, where someone has previously worked or studied, how brilliant their resume says they are, or the effectiveness with which they deploy their words (indeed, 'words' are often a contrary indicator). When all is said and done, the key question is: can this person, when faced with a range of extraordinarily complex problems, identify and select the right solutions? I have discovered the hard way that such decision-making is far more difficult than the vast bulk of us appreciate. And it really represents a different form of intelligence.

For example, many lawyers and investment bankers are in the top decile of the population apropos their academic aptitude. But in my experience, they are typically terrible decision-makers in a commercial context. I have a theory that the reason there are few entrepreneurially successful lawyers is because the five years of tertiary education, combined with the conditioning endured during their professional careers, results in a rewiring of their neurological chemistry (or perhaps the manner in which their inter-neuronal connections communicate).

Studying and practicing law is mostly about identifying infractions within a preset framework—whether you do or don’t break the law. So much of their lives are dedicated to thinking about the identification of problems that they become unsurprisingly expert at this task. But this is to the manifest detriment of a different, but equally important, facility: coming up with creative solutions.

I have spent millions of dollars in legal fees over the last few years (and have three members of my family who come from the creed), and can tell you that it is very rare to find a lawyer who is instinctively good at supplying you with reasons why problems do not exist, or solutions that make those problems go away.

Whenever I have raised this hypothesis about the innate risk-aversion of lawyers with a senior member of the fraternity, and how this pollutes their decision-making in both their public and private spheres, the response is typically one of emphatic agreement.

Of course, Malcolm Turnbull is an exception to all of this. He has been a phenomenal commercial success most of his life, and could never be described as risk-averse.

I have known Malcolm personally and professionally for many years, and had high hopes for his premiership. I think many folks on both sides of politics were pleased to see an individual who had achieved so much, and who was not a member of the cradle-to-grave political class, choose to sacrifice his commercial interests at arguably the height of his career, and make the oftentimes taxing leap into the public domain (which he had, admittedly, participated in many ways previously, such as through his leadership of the republican movement).

There is no doubt that Malcolm is an exceedingly complex character, and I have little interest in speculating on the vagaries of his personality, which is an inherently subjective exercise. But based on my actual exposures to him, I would say this.

First, while almost everyone has personal ambitions, I believe Malcolm made the move into politics for absolutely the right reasons. He has more care, love and passion for this country in his pinky than most of his political peers exude through their entire being. As far as I can tell, Malcolm really is driven by an altruistic desire to make Australia a much better place.

Unfortunately, most people tend to make the mistake of confusing his remarkable intellectual intensity, curiosity and energy with mere megalomania.

Now I don’t think Malcolm would deny that he has a healthy ego. But you need a healthy sense-of-self in order to have the courage and conviction to take risks. So I don’t have any problems with Malcolm’s self-belief, which is, in fact, an asset to us all.

Second, I have had the good fortune to work alongside many brilliant folks in my life. But in terms of an ability to absorb and accurately synthesise vast reams of very complex information, Malcolm really tops them all. He has no equal that I have encountered in this regard. His raw energy and intellect are awesome to behold. And it would be magnificent to think that one day we might have a public leader possessed of these qualities (having said that, many claim that Rudd is imbued with similar traits, which I can’t comment on because I have never worked with the guy).

My criticism of Malcolm from the early days of his leadership has been the decision-making. My theory from the outset has been that Malcolm was served very well from the time of his entry into parliament, through the Howard years, to the ultimate leadership of the party, by a strategy of adopting a low radar cross-section.

One of Malcolm’s best attributes is that people project on to him what they want to see: in this sense, he is a bit Obama-like—a cultural chameleon. I had countless militantly-left-wing friends who were naturally drawn to him due to his progressive social policy instincts. Yet the same was also true of members of the hard right, where Malcolm’s private commercial success combined with his deeply conservative economic principles resonated robustly. In fact, I am laughing out loud right now thinking of two of my friends who were enthusiastic advocates. One is arguably the most conservative academic economist in the country, whose shiny dome is synonymous with the prescriptions of the far right. The other is an inspired young lady currently in East Timor who has spent most of her life as a selfless campaigner for human rights, social justice and other left-orientated causes. And she hates conservative politicians with a barely concealed passion.

In any event, I think this ‘stealth strategy’ worked well for as long as Malcolm was not in a position of power. He could effectively leverage off his multi-dimensional brand while all the while allowing people to perceive whatever they wanted to believe.

But with an extraordinarily ascendant first-term Rudd government, and the likelihood that Malcolm was always only going to be a one-contest wonder, the say-nothing, do-nothing approach in the vain hope that Rudd would blunder into some mortal mistakes was never, in my estimation, going to work.

I think that within a few months of him taking over from Nelsen it was obvious that he desperately needed political definition: the electorate was yearning to move beyond his well-understood public profile and finally get a better grasp of precisely what he stood for on a range of subjects.

Of course, the trade-off here is that by articulating specific beliefs he would start inevitably polarising supporters and run the risk of telegraphing his policy proposals to the other side well in advance of an election. I was nonetheless convinced early on that this was a risk he had to take. Yet it was not to be.

In many ways I think Malcolm has been overwhelmed by poor, and highly orthodox, advice from old hands. The issue is that a conventional political strategy of saying very little, and hoping that the circumstances would fatalistically conspire in his favour, was always going to be a low-probability approach, which to my mind was a waste of time. I also think that these mistakes were compounded by an underestimation of the ability of his adversary.

Kevin Rudd is a breathtakingly-brilliant politician who warrants enormous respect. While I think it is true that he has made many small mistakes that have potentially far-reaching consequences, these are also quite reversible. And I am confident that to the extent that Rudd has made occasional mis-steps, he will pragmatically correct his course once the weight of evidence suggests he should do so.

As a parochial Australian, and having experienced first-hand just how hard it is to make the right decisions in life, I have to say that I am pleased—proud even—by the way in which the Rudd Government has adopted such an open mind to thinking about policy problems and their necessary responses.

While some criticise Rudd for being bereft of ideology (if we set aside his guff about neo-liberalism), I think that this is actually his greatest strength. Rudd has no preternatural intellectual master. Indeed, he is arguably a slave to the empirical facts of the day. It is precisely the ability to dispassionately appraise problems and develop solutions on their merits that makes this administration so capable (even though one can doubtless debate the integrity of the outcomes).

Now this is obviously a very fine line. The risk is that governments intervene in unproductive ways. A classic current example is the purported desire of ASIC to unilaterally determine what financial products consumers will and will not have available to them. Prior to the GFC, the policy approach was one of maximum disclosure; equip consumers with all relevant information about the risks they face, and let them exercise their free will to choose the right option for them. Today we confront the rather scary situation where the right to determine our destiny is literally being taken out of our hands and internalised within the remit of the regulator. While this clearly has some superficial merit in helping avoid the product risks that materialised during the GFC, the costs, in my judgment, outweigh any ensuing benefits.

I think governments sometimes forget that risk is an unavoidable part of every day life. Some businesses and products are meant to fail, and trying to prevent every collapse is utterly counterproductive. It is precisely through this Darwinian process of trial and error that we improve our collective welfare. Along similar lines, consumers will inevitably select investments that don’t always work out. But once the losses are incurred and the associated risks understood better (think CDOs), the chance of the next generation of participants repeating exactly the same mistakes is minimised. Products are changed, and the universe of opportunities available to us all improved.

On the conservative side of the equation, my concern has been that policy action gets stifled by ideological inertia. The natural disposition is always to do nothing. Now this is not necessarily a bad thing: one might argue that it necessitates detailed cost-benefit analysis and only when the evidence favours action is government compelled to move. But I think that oftentimes conservative parties allow ideology to suffocate answers.

Climate change is a classic case in point. Malcolm’s most persuasive argument on this front is that it is all about risk-management. Warwick McKibbin of the ANU has been one of our best public proponents of the need to develop policy within a probabilistic framework. He recently excoriated Lindsay Tanner for arguing that one of the key learnings from the GFC was that we have to improve our forecasts. Warwick responded that we will never know with certainty what the future holds. What we have to do is maniacally avoid deterministic policy-making frameworks (ie, those irreversibly hinged to specific outcomes). What we should, by way of contrast, strive to achieve are policy prescriptions that can accommodate a rich range of future contingencies (ie, based on many different forecasts).

Anyway, that’s all I have to say on this subject. I think the events of the last week are a net cost to the country. We have not taken a forward step. While I know there is every chance that Julia Gillard was being tactically opportunistic in praising Malcolm, I also believe that climate change, which is a topic on which I do not have strong views or profess any expert knowledge, is a genuine case of a potential challenge that we all face that is well beyond ideology or partisan politicking.

Here’s to hoping that Malcolm’s torrid time does not dissuade other talented individuals from pursuing the public path. Perhaps following this fracas the big fella will throw caution to the wind and found his own political party...I am thinking of the Australian Republican Party with an unconditional commitment to combating climate change and reinvigorating the dormant republican movement. Now that would be sure to split the Liberal Party vote.