Aug 11, 2025 | Governance, Management
Opportunity cost is everything you could have done with the money, time, and focus you’re about to expend on a different course.
In a small business it’s never theoretical: it’s overtime you can’t afford, stock you can’t reorder, family weekends you skip, fancy software that never delivers what was promised. The list seems endless.
Opportunity cost is tough to calculate. It assumes that future benefit from something you did or did not do can be calculated. However, it is often obvious in hindsight, so learning from past misjudgements will assist future choices.
Opportunity cost steals from three of your pockets:
- Cash. Dollars used on ‘X’ would have been better spent on ‘Y’
- Time. The time spent Learning how to use ‘X’ would have been better spent deploying ‘Y’.
- Focus. Our Mental bandwidth is finite. More than one priority at any given time dilutes the return on the time we invest, as well as the quality of the output from that time. Nobody ever went into a ‘flow state’ thinking about two tasks.
For example, deploying a CRM is one of the great hidden generators of opportunity cost, particularly for SME’s. Customers will never thank you for not responding quickly to their enquiry. Failure to do so will erode hard won leads and brand credibility, while the lead evaporates.
Those hits don’t show up in the accounts this month, or quarter. Usually, they do not show up at all, but they quietly compound.
A responsible management asks themselves two seemingly simple yet very complex questions when considering the deployment of any of its limited resources.
- Where else could we spend this resource?
- What are the financial, cultural, and operational consequences of the choice we are making?
Opportunity cost never sends an invoice. It quietly drains the financial accounts, bleeds stakeholder trust, and erodes the energy and commitment of employees. These are significant hidden costs that the best enterprises minimise.
Stop chasing that new shiny object by counting what it will steal.
image by Sora
Jul 23, 2025 | Governance, rant
Last week’s “unintended” Treasury leak about the unsustainable state of the budget fooled nobody who’s been around the block. It is an old trick: float a policy balloon, wait for the howls, then retreat or advance, depending on which way the wind is blowing.
Fiscal discipline? We all cheer for it as long as it doesn’t hit our own slice of the pie.
The Treasurer’s challenge is less about balancing numbers, and more about navigating the swamp of human psychology. We feel the pain of losing a perk much more strongly than the pleasure of gaining it.
Daniel Kahneman called it “Loss Aversion”.
Hand out a benefit to appease a small group, and you’ve just set a trap for your future self. Try clawing it back, and the noise will make a toddler’s tantrum look civil. Ever tried taking a birthday present from a six-year-old? Good luck.
That’s how government spending grows. Drip by drip, group by group. Give out enough trinkets and nobody notices until it’s time to start collecting them back. Suddenly, the losers organise, mobilise, and scream bloody murder, while the rest of us just mutter, shake our heads at the stupidity of it all, and pay the bill.
Take the latest fuss over super accounts above $3 million. Only a handful are affected, but the outrage is theatrical. Why? Because the few that are in line to benefit do not want that benefit stripped away. Meanwhile the vast majority of us will not be affected, but do tend to be caught up in the emotion of being rorted by the government, again, without understanding the facts.
Nobody wants their treat taken away, but most are perfectly happy to see cuts, as long as it’s not their treat on the chopping block.
Maybe we’re just a nation of optimists who secretly believe we’ll all be in the $3 million club one day. Dream on.
The real leak here? Not Treasury’s numbers, but the enduring political tactic: float a “mistake,” watch the reaction, then call it consultation. Mr. Chalmers is no stranger to policy trial balloons.
Header courtesy of DALL-E
Jul 21, 2025 | Change, Governance
Few readers will have heard of Hyman Minsky. However, given the Australian parliament reconvenes in its post-election form tomorrow, it may be time.
Minsky was a prominent economist whose theories, labelled ‘Financial Instability Hypothesis’ were largely ignored until the financial crisis in 2008.
The dominating financial theory before the wake-up of 2008 was that financial markets were generally efficient, reflecting the best information available at any one time.
The financial crisis killed that idea.
Suddenly Minsky’s theory was that markets are driven not by just the available information, but by cycles of greed, fear, and the pursuit of power. (I feel certain that Daniel Kahneman would have agreed)
I wondered if the same cycle could be applied to the Australian body politic and economy.
It seemed an appropriate time for such thoughts, heading as we are into a term of government where the incumbent has a huge majority, and no effective opposition.
So how appropriate is the Minsky cycle to the current political and economic environment the Albanese government faces?
In the aftermath of the election, aware sentiment can change quickly, the Government surprises, and turns risk averse. After all, they now believe they have several terms to ‘get stuff done’, and do not control the Senate. This starts to create frustration in the electorate, as it seems obvious that genuine change is more possible now than for the last 30 years. Only vocal interest groups are scaring the government into inaction. The presence of such hoarding of political capital provides the catalyst for a renewed opposition to effectively attack the inaction on pressing issues.
The cynic in me assumes that none of the challenges we face as a country will be adequately addressed. Politics has devolved into a Ponzi scheme of elaborate lies, misdirects, and inaction. The focus is on gaining and keeping political power for the sake of the power, not for the long-term betterment of the country.
The optimist in me is tempted to listen to the practiced rhetoric of the two leading Labor figures and think: ‘perhaps this time’.
The header is my adaptation of the Minsky cycle reproduced below.
With apologies to Hyman Minsky.HET: Hyman P. Minsky
Jun 20, 2025 | Change, Governance, Innovation
Australia’s governments over time have, rightly, believed that the commercialisation of innovation is the key to long term prosperity.
As a result, governments of all persuasions and at all levels dole out billions each year in all sorts of grants, subsidies, and parallel programs.
Then, on a regular basis we have enquiries by well meaning and usually highly qualified people that come up with similar conclusions that the previous few and often very expensive enquiries have delivered: we are crap at it.
In successive weeks, the PM and Treasurer presented their view of the challenges facing us at the National Press Club. Both were very impressive performances, and in particular the treasurer hooked his agenda firmly onto the ‘Productivity’ challenge.
The Treasurer outlined the principles of his agenda. However, he did not get into the weeds of the sources of the failure to date that see us struggling with productivity in the economy, the problem to be solved. He did however acknowledge that hard to measure services are increasingly dominating, and we are all getting older, making the productivity challenge that much greater.
Sensibly after repeating the same mistake numerous times, and ending up where we are now, we should be asking ourselves ‘Why’.
My take on ‘Why’.
Bureaucracies have two conflicting, irreconcilable imperatives:
- On the one hand, they want to be fair and treat everyone the same. This makes commercial in confidence often challenging. (perhaps I overemphasise this as a result of a very nasty incident in my commercial past that will never be forgotten)
- On the other hand, they want to exercise discretion and take account of individual circumstances and technical advances made by program participants engaged in the various programs.
There’s no way to easily optimise these conflicting objectives at the same time.
On top of those two drivers of bureaucratic fossilisation, you have two further impediments in the Australian context:
- The impact of personal ambition, turf protection, and management of public sector KPI’s that have nothing to do with outputs, but everything to do with inputs that hobbles public sector engagement.
- Our federated system drives fragmentation.
Published today is an excellent analysis of the way forward by John Howard (not that one) from the Action Institute that I hope is widely read and deeply considered by those who will be involved in the treasurers productivity roundtable in August.
Jun 2, 2025 | AI, Communication, Governance
Analysis implies the intelligent interrogation of data, the use of differing ‘frames’ through which to see the data, and to enable those non obvious connections to be made.
First you need ‘clean’ data, without which, nothing that follows will be worth much.
Thoughtful, critical analysis of data leads to insight, from which comes that elusive lightbulb moment.
Reporting is the opposite, it simply requires the cleaning, summarising and posting of the data without the critical thought from which real insight evolves.
No lightbulb.
AI is good at that, while not being good at generating insight.
Being data rich but insight poor is now a very common problem.
AI will not solve it for you, people are needed. Not just any people, seat warmers, but the right people with the curiosity and ‘why not’ attitude of youth, combined with the wisdom of experience and domain knowledge.
Unfortunately, these people do not grow on trees, ready for the picking. You have to grow and nurture them yourself, while recognising that many will move on at some point. The old adage of a rising tide lifts all boats is nowhere more relevant.
May 26, 2025 | AI, Governance, Strategy
Innovation using physics is forging ahead at an accelerating rate.
Remember the speed at which a covid vaccine was brought to the market after the first identification of the virus. Instead of the usual 10 to 15 years we suddenly had that process compressed into 18 months.
And yet there remained those who refused to accept the vaccination for a range of personal and behavioural reasons which many would say are irrational.
Somewhere the line between the technical innovation involved in the hyper-rapid final stage development of the vaccine and the humanities driving behaviour crashed into each other.
As the rate of technical innovation across every domain accelerates it is likely we will continue to stumble across this barrier to adoption, and a fragmentation of adoption across a range of behavioural parameters.
Simply another social tension driven by the speed at which the modern world is evolving. It is way beyond the speed at which our DNA allows behaviour and attitudes to evolve.
The situation in front of us right now is the degree and manner in which AI is accepted and adopted by organisations and by individuals.
We managed this dilemma in the motor industry as it became obvious that it was profoundly important to incorporate safety into the vehicles as a means to save lives. As a result, it became mandatory to design crumple zones into cars, and install seat belts. Regulatory intervention and oversight 60 years after it became obvious that a car could kill its occupants.
Where will the equivalent crumple zone emerge in the arena of AI, and will it be in time?
