The Best Australian Business Writing 2012

By Andrew Cornell

Have Baby Boomers been forced back to work since the global financial crisis? Will pre-commitment cards for poker machines coerce the addicted gambler to think before he or she acts? Is airport security a waste of time and money? Covering topics such as these with more than simply a series of numbers and facts, this book is informative, provocative, funny, even moving. A first edition of a new annual anthology, this account not only showcases the best of Australian business writing, but also demonstrates just how good—and how important—writing about business can be.

• Language: English
• Publisher: NewSouth
• Release date: Jan 1, 2013
• ISBN: 9781742241326

Book preview

Taxes

Introduction:

Humanity in a balance sheet and P&L

Andrew Cornell

A glance back 20 years at the pages of the world’s major business newspapers and magazines – at the time the only repositories of mainstream business writing – reveals some very austere publications. Long slabs of text, very little colour or humanity. Graphs and photographs almost non-existent.

If readers outside the world of business were interested in what these pages contained, the publications hardly welcomed them. Worthy though the writing often was, reading it was a chore. This was a time when the Australian Financial Review, the Wall St Journal, the Financial Times, the Nihon Keizai Shimbun could pretty much take their readers for granted. They were the business papers of record for their nations, and anyone in business who turned up at a meeting, a conference, a lunch and was not familiar with what was in that day’s paper of record was in danger of missing a critical insight or not being taken seriously. It was a powerful anxiety. The papers had to be accurate, they had to be worthy, they had to contain information of importance to their readers. But they could get away with being boring. For its first three decades, the AFR, the paper for which I have worked for 20 years, had no photos, no graphs, just line drawings. And worthy writing.

Today these papers must still have all these qualities, but they must also be compelling. They no longer have monopolies. They must compete with business stories written for the web, for blogs, wires, on Twitter. There are entire television channels and thousands of websites dedicated to business. Alongside the written word, consumers of business information have immediate access to live data, video, analytical tools, talking heads. Yet the written word in the business world has endured – and indeed as the internet revolution erodes the traditional newspaper world it is the business media which is proving the most resilient. Business readers are more willing to pay for content. Yet that also means that business writing today, whatever the vehicle, can no longer take its readers for granted; worthy is no longer enough. Before everything else, the writing must be engaging: it must say something new and say it in a way which keeps a hold on the reader.

There has also been another development in the last two decades: an increasing demand for business information. There has been a realisation more broadly that business matters, that it is not just something of interest to accountants and stockbrokers. No matter our ideological persuasion, we recognise today that we live in a capitalist society, and that our everyday lives are subject to the dismal science of economics – something reinforced dramatically by the financial crisis of 2008 which continues to roil society.

The best business writing, then, is no longer the province of arcane business journals. For every Rowan Callick writing in The Australian there is an Alan Kohler writing online or telling a story with charts for the ABC. For every Pamela Williams in the Australian Financial Review there is a Gideon Haigh in The Monthly. For every Ross Gittins in the Sydney Morning Herald there is a Guy Rundle on Crikey flinging out social commentary battened with business analysis.

The best business writing, of course, has always been about more than business: it is about history, ethics, crime, intrigue, morality. But with the growing realisation that business and economics structure our lives, writers from non-business backgrounds, such as Bronwyn Adcock, have tackled the intricacies of business models. And some technocrats, such as Reserve Bank director John Edwards (a former journalist), are wonderful writers (and he is an adviser to this collection, for which we are especially grateful).

Ironically, as the language of business infiltrates the social realm, the discourse of business and economics is being infiltrated by the human sciences: psychology, epistemology. Behavioural economics. The most telling analysis of what went wrong in the financial crisis of 2008 was that market participants and policy makers conflated two realms of knowledge, the hypothetical and the mathematical, and granted their forecasting models a precision that never existed, with catastrophic results. In his selection here John Quiggin warns against such a slavish devotion to the ‘numbers’. History and human nature, not spreadsheets, are once again recognised as the real forces in economies, as Judith Brett argues in her essay on the importance of rural Australia.

‘Business’ was being done in human, even pre-human, communities. It would have emerged from the simple sharing of favours and tasks within social groups, evolving into barter as the complexity of groups increased. Trade between groups, tribes, implicitly involves the attribution of value to commodities and services – and so we have the rudiments of an economy. Human history of course evolved economically for tens of thousands of years without the need for business – and certainly management – writing. However, fascinatingly, some early human art can be interpreted as recording trade. Perhaps this was the start of the accounting profession?

If we can make any sense of the overwhelming amount of financial information which surrounds us today, we can do so partly because we have recourse to a language all in business refer to, whether it is understood or not: double entry book-keeping. We start this anthology with an excerpt from Jane Gleeson-White’s highly entertaining book which traces the evolution and impact of this new language. She identifies the paradox of this system which has allowed centuries of business people to monitor their affairs: it is not an inert medium. We may think of accounting practices as simply proxies for the real world, a way of understanding complex events. But accounting practices, as Gleeson-White and Quiggin describe them, are also value systems in a more existential sense. If something can’t be accounted for, does it exist? And perhaps even more corrosively, some things which we can measure, and do count, add to GDP even as they subtract from human wellbeing. Disasters improve GDP.

Business is undertaken by human agents in particular circumstances and the best business writing never forgets this. The selections here from Pam Williams, Eric Knight, Richard Baker and Nick McKenzie capture this human dimension with wonderful clarity. But Adcock’s ‘Dispossessed’ goes a step further. Her essay is not foremost a business story; it is a painstaking portrait of an Aboriginal community, rich in the detail and pathos of human affairs. Her method is to assemble portraits, but even here business matters because of the failure of a local enterprise and its tragic repercussions.

Baker and McKenzie’s Walkley Award-winning series on bribery and corruption surrounding the sale to offshore markets of Australia’s unique polymer currency printing technology delves into intrigue, double dealing, criminality, shadowy denizens of exotic locations, stuff hardly unusual in business. But in this case it also involves the very proper world of central banks: Australia’s highly competent, meticulously governed institution at that.

Multiple award-winning writer Pamela Williams’ work is famous for its fine detail and inside information, and here she investigates the corporate governance event of 2011, the internal turmoil at Australia’s sovereign wealth fund, the Future Fund. Williams examines the personality foibles at the heart of board and management dysfunction, and while her story predates a further plot twist in the saga – the appointment of respected director David Gonski as the new chairman of the fund even though he had been brought in as a consultant to advise on the job – it superbly renders the clashing of personalities and cultures.

Eric Knight’s portrait of Chinese-Australian solar panel millionaire Shi Zhengrong is a more traditional profile and also a particularly revealing take on the Australia–China story. But Knight goes much further, into something fundamental to the current debate about the structure of the Australian economy and its productivity. He argues that value comes from networks, that more important than amounts of money is how well money is targeted and leveraged by giving good prospects the freedom to use it as they see fit. Even though Shi’s production base is offshore, this story argues that Australia still gets value from it. And that argument can still be made despite the glut in the solar panel market which has crushed Suntech’s market value since Knight’s profile appeared and seen it embroiled in a fraud case in China. As Knight writes, ‘It is about time we claimed Shi Zhengrong’s story as our own.’ Knight may well phrase that differently today but his broader theme remains intact.

The environment business takes place in is also inextricably entwined with the commerce itself. Indeed the trend in office design in the last decade has been to explicitly link the built form with P&L statements, as is seen in the ‘play’ spaces of internet ventures and the ‘campus-style’ floor plans which encourage ‘bump spaces’. Such theory has a rich tradition and Gideon Haigh’s monumental social history of the office maps it. Here we excerpt one of his saucier chapters, where he tracks the convergence of office structure, gender politics and sex. I’ve chosen this chapter not just because it is racy and highly representative of Haigh’s style – it is both – but because it also illustrates a major theme of this anthology: business is not just about business models and spreadsheets – it is about people. Catherine Fox treats gender politics in business even more sharply in her new book on the ‘mythology’ of women’s ambition in business.

The dominant theme of Australian business for the foreseeable future is Asia, particularly China, a theme wonderfully circumnavigated by Tim Harcourt, the ‘airport economist’, the doyen of Australia’s China journalists Rowan Callick and Lowy Institute director Michael Wesley in an excerpt from his book which the Grattan Institute put on the Prime Minister’s Christmas reading list. The importance of Wesley’s argument has since been underlined by the notoriety achieved by the opening subject of this excerpt, the electronics firm Huawei. Founded by a former Red Army general, Huawei has since, controversially, been banned from participating in parts of the National Broadband Network.

Hopefully the selections in this anthology both represent and promote the diversity of the best business writing in Australia today. Whether it is cricket, in serendipitously serial contributions from Christopher Lee and John Stensholt, environmental science in Andrea Koch’s treatment of the ‘peak soil’ argument (an emerging concern of even greater import than ‘peak oil’), Ben Eltham on the celebrity CEO phenomenon in the arts, Saul Eslake’s economist’s take on public security or Mat Dunckley’s business models for dying.

The best business writers are not slavishly pro-business; indeed they recognise that social and economic advancement are best served by succinct criticism, and so John Durie, widely recognised as Australia’s pre-eminent business commentator, puts the boot into the growing propensity of business to just whinge and rent-seek.

Nor is the detailed scrutiny of balance sheets inimical to humour. Almost since the dawn of serious business writing in Australia, Trevor Sykes has been one of its most respected exponents, a forensic accountant of a scribe whose ability to tease apart the fine threads of dissemblage in company statements is legendary. Pierpont, meanwhile, is an overweight, cigar-smoking, Bollinger-swilling denizen of dodgy boardrooms including the legendary black hole for investor capital, Blue Sky Mining. Somehow, the two of them have connived to produce what for decades across the AFR and The Bulletin has been some of Australia’s most incisive and entertaining business journalism. One suspects Pierpont outsources the hard work to Sykes, but equally, Sykes seems happy to let Pierpont say some of those things a business journalist often wishes to say but can’t. Pierpont’s analysis of the Port Adelaide football team and its sponsor is a classic of the genre.

Business writing can, of course, also be colourful in negative ways. Business communication, often by way of the Powerpoint presentation and external consultants, is all too often a jargonrich experience, the language designed – often with extreme prejudice – to obfuscate rather than clarify. Consider ‘fugitive emissions’, the term used by chemical company Orica to describe gas leaks of highly polluting ammonia from its plant near Newcastle, NSW, an eerie echo of the ‘friendly fire’ which kills people. Or ‘negative good’, a dental industry spokesman’s description of the damage from teeth whitening. Then of course there are entire compendia of weasel words and phrases like ‘pushing the envelope’, ‘taking it offline’, ‘plucking low-hanging fruit’, ‘there’s no I in TEAM (although smarties have long since pointed out there is a ME), and, for the internet age, ‘2.0 thinking’. Business leaders lately have taken to ‘calling out’ matters they want to emphasise. Don Watson skewers them all as he continues his ongoing, but one fears Sisyphean, project to excoriate the crust of jargon from business and professional writing. He quotes George Orwell with an exhortation which could be the epigram for this anthology: ‘write in concrete terms and use concrete examples; hate cliché, love verbs; give up dot points and take up sentences; think’.

Despite this challenge, business writing today is a rich field. We tend to forget that some of the giants of the past, such as Adam Smith, John Maynard Keynes, Karl Marx and John Kenneth Galbraith, were wonderful writers. And were Shakespeare writing today, he would probably set a play on Wall Street, so fertile and febrile is the complex play of humanity there. And so fundamentally important is the subject.

Along with John Edwards, I’m very indebted to our four other advisers, Nicholas Gruen, Alec Cameron, Jason McPherson and Heather Ridout, for their scrutiny of the work and invaluable opinions. Full responsibility for what has finally been included rests with me, but the presence of five such eminent readers peering over the shoulder has certainly kept me focused. Once again, many thanks.

Some of my selections are written by current and former colleagues, almost inevitably, because my paper, the AFR, is the only specialist daily business publication in Australia, and because in my nearly 30 years in journalism, across News Ltd and Fairfax, AAP and international publishers, I have had the good fortune to work with and learn from many of Australia’s pre-eminent business writers. I’ve tried to bear in mind, again ably buttressed by our advisers, any biases with which I approached the material and can only assure the reader that I have strived to judge the hundreds of candidate writings objectively. My aim has been to find pieces that are above all well written, but that are also about important subjects or fields that demonstrate the variety and pervasiveness of business. As with all the best business writing today, I found these selections both worthy and compelling.

Jargon

Love the neighbours

Bobby Kennedy and the wealth of nations and corporations

Jane Gleeson-White

On 18 March 1968, three months before an assassin’s bullet cut short his life, Senator Robert F. Kennedy made an impassioned speech at the University of Kansas. He spoke about the health of his nation, the economic powerhouse that is the United States of America, and the way we measure national wealth using figures such as the Gross National Product (GNP). Kennedy said:

Too much and for too long, we seemed to have surrendered personal excellence and community values in the mere accumulation of material things. Our Gross National Product, now, is over $800 billion a year, but that Gross National Product – if we judge the United States of America by that – that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman’s rifle and Speck’s knife, and the television programs which glorify violence in order to sell toys to our children. Yet the Gross National Product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile.

Like many before and after him – including the GNP’s creator, Simon Kuznets – Senator Robert Kennedy believed there was something profoundly wrong with the way we calculate our national wealth and with the numbers we produce to do so, such as the GNP and the Gross Domestic Product (GDP). As Kennedy pointed out, these numbers generate alarming anomalies: in their parlance cigarette advertising is worth more than the health of a child. And yet today, 40 years after Kennedy’s call for their revision, these numbers continue to rule the policy decisions of governments, financial institutions, corporations and communities. These flawed numbers rule our lives.

How could we have got things so wrong?

And it is not just in our national accounting that things have gone so awry. From the notorious implosion in 2001 of the 1990s’ ‘It Company’, the energy giant Enron, to the near collapse of the global financial markets in 2008, we have witnessed a wave of spectacular cases of profoundly misleading, inscrutable and flawed corporate accounting.

* * * * *

On 27 February 2008, the 2007 annual accounts of the Royal Bank of Scotland were signed off. By asset size, the RBS was titanic. It was the biggest company in the world. The group’s assets were larger than the GDP of many nations, including the United Kingdom’s (which was £1.762 trillion versus the £1.9 trillion group assets of the RBS). As befits a massive financial institution entrusted with other people’s money, the rhetoric of the company’s 2007 annual report was responsible and measured:

It is the Group’s policy to maintain a strong capital base, to expand it as appropriate and to utilise it efficiently throughout its activities to optimise the return to shareholders while maintaining a prudent relationship between the capital base and the underlying risks of the business.

A mere two months later, in April 2008, the so-called prudent bank was sinking, torpedoed by its exposure to toxic assets which left a £12 billion gaping hole in its balance sheet – a figure which soon stretched to £100 billion and counting. And yet nowhere is this multibillion-pound-sterling chasm evident in the group’s accounts. Company accounts are supposed to be the tools by which corporate transparency is guaranteed for shareholders, the market and the public alike. And so shouldn’t a massive shortfall of £12 billion be obvious in the RBS accounts? Or, as writer John Lanchester put it:

By rights, by logic, and by everything that’s holy, it should therefore be possible to see, somewhere in the accounts and the balance sheet, some clue to what went wrong – especially given that whatever went wrong must already have gone wrong, to hit the company so hard less than two months later.

It was later revealed that the group had a much greater exposure to the sub-prime mortgage market than it had publicly admitted. Despite this apparent gross misrepresentation of the company’s assets in February 2008, a spokesman for the RBS said: ‘The Board was in possession of full information and the details provided to the market in all financial reporting reflected the Group’s honestly held opinion at the time.’

This would become an all too familiar refrain over the coming months, as the behemoths of finance and banking toppled – Lehman Brothers, Lloyds-HBOS, AIG, Anglo Irish Bank, the Icelandic banks Glitnir and Landsbanki – all struck down by ‘gigantic holes’ that appeared, apparently out of nowhere, on the asset side of their balance sheets. And on their way down, these giants brought the international financial system to its knees. The costs of these collapses will be paid by taxpayers for decades.

* * * * *

Accounting generates annually published financial statements that are meant to guarantee corporate transparency, thereby checking corporate behaviour and ensuring that markets function efficiently. These statements are the balance sheet, income statement, cash-flow statement and statement of retained earnings. But it turns out that these tools cannot be trusted to convey the true state of a business at all. And yet governments, managers, policy makers and shareholders alike depend upon this information when making decisions that affect the lives of everyone.

How could we have got things so wrong?

Our world is governed by numbers generated by the accounts of nations and corporations. And yet these numbers are arbitrary, illusory. So how did we come to depend on these fallible beacons to direct our policies, institutions, economies, societies? Where did these false prophets, these numbers and accounts, come from?

My book, Double Entry: How the merchants of Venice shaped the modern world – and how their invention could make or break the planet is my attempt to answer these questions, and more. But these were not the questions I first asked myself when I set out to write it. Its evolution falls into three distinct stages. The original idea was born from a summer I spent in Venice as an intern at the Peggy Guggenheim Museum, when I was inducted into the mysteries and symbolic language of Italian Renaissance painting, and an economics degree I started the following year. Renaissance art and economics merged in my mind and I became curious about their relationship, about the wealth that made the art possible. I still have the yellow Post-it note which records my original intention for this book. It says: ‘I’d like