[Applause] [Music] [Applause] [Music] conversations with Tyler is produced by the mercus center at George Mason University Bridging the Gap between academic ideas and real world problems learn more at marcus.org for a full transcript of every conversation enhanced with helpful links visit conversations withth tyler.com hello everyone and welcome back to conversations with Tyler today I am
sitting in Tatu city which is a special Enterprise Zone right outside of Nairobi Kenya and I'm here chatting with Steven Jennings Steph and I go back a long way we knew each other in New Zealand over 30 years ago where we worked on New Zealand reforms together to give you a brief overview of Steven's biography he was a critical figure in New Zealand treasury working on those reforms later at credit SS first Boston he has an
extensive history of working in emerging economies and he is now founder and CEO of a company called ravor Steven is based in Tatu City itself again right outside of Nairobi and Tatu city is an attempt to reimagine Urban environments for Africa there are numerous other projects in other countries and we will talk about what step is up to Steph welcome so so good to be with you Tyler
and it's been amazing to reconnect it's like the 30 years were really like a week I think 32 years we figured out we just picked up the same thread of conversation and ways of thinking now try to sell me on Kenya if I look at some of the other major African economies they appear to have taken steps backward in the last two to three years why be optimistic about Kenya in particular yeah Kenya has been on a path
of modernization political and Economic modernization and Development really going back to the'80s so it's averaged over 5% GDP growth over that period but it's also modernized as an economic and political system moving away from one party essentially dictatorship to very vigorous democracy and pl pluralism as we saw last year huge development of infrastructure modernization of the
economy improvements in school enrollment life expectancy you know every indicator of development as with much of the conent has really been transformed over the last 25 years and our expectation is that will continue but say of politics is the major risk to African development as it's proven in so many countries why be more optimistic about the politics here you know we have a more pluralistic system you haven't
had the coups or dictators or disruption you have had in many other African countries so the the transition is very organic we have the the checks and balances of a system that you'd like to see in in a country you're investing in for the very long term that's not necessarily the case in in the likes of Nigeria Rwanda or even in South Africa today why is it that so many African
cities at least appear to have very low or even zero agglomeration externalities it's not true for cities around most of the world but it seems to measure is true for Africa what's the difference and where does that come from it's something that's very unusual about Africa so as you know in Asia with growth you saw glomeration of economies in cities became more efficient there's some pretty obvious reasons why that
hasn't happened Happ here so proper planning and controls really broke down in the' 60s so there there were no the plans were not enforced the development was completely haphazard utilities were not modernized and capacity was not built so you have huge capacity issues and shortages around power water and other amenities you have enormous congestion problems so the cities are clogged the service
levels are poor the planning has been almost non-existent and there are massive capacity issues and transport issues so as they've grown they've become more congested and less efficient so you have a plan through Tatu City and some of your other projects in essence to bring glomeration externalities to at least some African cities is that a fair way to put it yeah 15 years ago it was a
plan I think it's Way Beyond the plan now I think we've proven beyond a shadow of a doubt if you create new large scale worldclass Urban infrastructure and administration that they will function as normal cities and you have the demand that you would normally have for a normal efficient International standard City so just give us some basic facts where is Tatu City right now and where will it be headed
when it's more or less finished yes Tatu city is the only operational special economic zone in the country it is 5,000 hectares of fully planned Urban Development it is at quite an advanced stage so we have 70 large scale industrial companies with us including major multinationals and many any of the regional leaders we have 3,000 students come on site every day to our four new schools we're Advanced and building the
first phase of the First new CBD for the region we have tens of thousands of call center jobs moving into that area together with other modern office amenities so all of the elements we have many residential modules thousands of new residential units at a wide range of price points so all of the elements of a new city are in place so how many how many people will end up living here around
250,000 and how many businesses there'll be thousands of businesses yeah the GDP of Tatu City how how would you imagine it what would you compare it to assume things go well the project is mature no I think we're in seven projects in five countries I think we're aware of every project across the continent but there's very little doubt at all that this will be the leading new city and the largest new city in subsaharan Africa and
eventually it'll cataly the whole region you don't have a barrier around this the spillover effects in terms of development and infrastructure will extend Way Beyond the borders of the city and we already begin to see that why not do a charter City we're first cousin well there's a lot lot of reasons that we haven't really had Charter cities happen it's a very interesting thought experiment the whole issue of
sovereignty seeding sovereignty and taking someone else's sovereignty is a pretty kind of intractable issue but we're like a first cousin to a charter City so we're a private municipality with a lot of devolved Authority so we have the ability to make decisions the way that a charter City would be we have the incentive to optimize the npv the long-term value of the city and you can
see that we've created many of the benefits in terms of quality of governance quality of infrastructure security environmental amenities so many of the envisaged benefits of Charter City are being realized within this model so the way you've designed water supply sewage electricity local infrastructure how is that drawn upon your background as a reformer and privatizers in New Zealand so here's
like your chance to do it right not in New Zealand what did you learn there and how how are you doing it here you it's a bizarre situation that every area of Reform and business that I worked in around the world the threads of that are picked up in this project so the governance issues through the reform efforts designing sez legislation obviously is as a public policy issue but I've worked extensively in water and
power so so understanding how those businesses should be structured and organized makes it a lot easier to set them up and and managing them so you know a city is very it's much more multifaceted than you would think the work that I did in New Zealand on Treaty of white tongy issues with with Mari has also informed a lot of thinking around community and property right issues so it's been this bizarre experience of all
these threads fortuitously being drawn together in these projects what's the hardest part about designing the incentives for a sewage system not the physical work but thinking through the incentives the challenges have to do with scale and time Horizon so in environments where utilities are not being provided by municipalities everyone tries to solve their own solution create their own
solution so they'll have their own water solution their own power solution their maybe their own sewer solution their own security solution clearly there's zero economies of scale and people don't have the expertise or even the desire to to solve those solution so you have these very Patchwork extremely inefficient and non-sustainable solutions to these very basic problems so a city has the
advantage that you are able to solve those problems for everybody and there's just tremendous economies of scale so in terms of quality and cost you get these tremendous advantages over what everybody outside of that environment is able to create but because renav owns the sewage system there's not the usual holdup problem with some outside Authority is that fair or no yes so one of the things you're solving is the
holdup problem at many levels so everyone has to deal with bureaucrats who won't Supply water who won't provide licenses who create tax issues every element of government you touch there's a holdup issue so there's economies of scale in solving that or mitigating that on behalf of everybody else we have to deal with it but it's more efficient to deal with it once than thousands of times for each developer
and each resident well let me tell you one of my biggest worries see if you can talk me out of it the more success you have in solving these holdup problems the more the land the whole Community is worth right that's what success means in a sense so you create one really big hold up problem that the incentive of politics to confiscate the rents from the land goes up and in terms of risk
diversification you put all the apples into this one big holdup problem it becomes a juice of your target how do you think about why that might work out well clearly that is a risk so the way you have to counterbalance that risk is you have to be adding more and more to the community and to the overall economy so tens of thousands of jobs become hundreds of thousands of jobs and those
hundreds of thousands of jobs can end up supporting a million people or half a million people if you're the largest source of FDI if you're the largest proponent of investment within the country so you have to be overtime recognized as providing huge benefits to The Wider Community give us a sense of the range of price points say someone wants to live here what does it cost so you know people envisage these projects as being
like gated communities for the elite and that is one model but that's if you think what a city really is that is not a city so a key the dimension of building a city that's efficient and has glomeration economies is mixed juice mixed income and you can't just pay lip service to that to make NOS happen it's actually in our interest to do that so for housing we go down to about $30,000 for what is really a world-class
product produced by unity homes so in terms of the finish the environmental amenities Securities pools bars these really are worldclass units equally we want the owners of major businesses and the biggest entrepreneurs in the region to come and live at Tatu city so we might have a product where just your land is going to cost you a million dollars before you build your house but
it will be extremely beautiful it'll have amazing amenities and you'll be in the heart of the project but we do and we have to accommodate for that full range and not just in housing things like restaurants and services nail salons you can make it just for the elite and a shopping more or you can have a variety of formats where you accommodate everybody and we go out of our way and it's very unusual how we
think about that we want the worker who's earning $250 a month to do some of his shopping to to have a restaurant that is Affordable for him we make a big effort to provide those services for those people let's say either you or someone else wants to do a version of the idea but with the price point at $10,000 what problem needs to be solved or what problems that to be possible how
do you the the price point for what for a home so you're say you're you're selling dwellings for 30,000 here and someone wants to they're inspired by what you've done but they're going to be in a poorer location and they want to bring costs down so they can sell dwellings for $110,000 so that's exactly the problem to be solved yeah but what needs to go right for that to be feasible it's not so much what needs to
go right it's the planning the technology and the scale so if you want to get the costs way way down in for a unit you can't have car parking car parking is actually very if you're trying to go from 30,000 to 20,000 to 15,000 you can't have car Parks So you you're building houses for people who will live within the city and who are going to be within a walkable distance of their work obviously you're going to
go up you're going to you need more and more scale it's a chicken and egg problem and getting affordable housing in subsaharan Africa because no one has has cracked that scale problem to what we're doing here so you need bigger scale you need to go up a little bit I think we know with our partners that we can go from we already know how to go from 30,000 to 20,000 and then it's going to get much
harder going from 20 to 15,000 if cars cost so much for the community how are you regulating cars it's not the cost of the car it's the cost of the land but say I want to buy a unit that has a place for me to put my car I can pay more and do that or I can't do that or no absolutely you can't and you can have two cars or three cars I just have to pay a steep tariff to be able to do so
but there's somebody else who would love to have a properly built safe secure apartment for 15,000 with nice amenities and a park and a playground you can do that but you probably won't have car parking for those people in the mature version of the idea how do I get from one side of Tatu City to the other let's say I don't have the car no street cars right there's shuttles or I walk or there's ebikes or so a lot of ideas on
urban planning are born or are driven by retrofitting of existing cities there's a lot of principles that are paid lip service to but the application of those is compromised by the fact that 99% of the time Urban designers are involved in the game of retrofitting imagine you sh sit down with a clean sheet of paper and you can think about how people are going to move around in the city and you can
do whatever you want to so if you ask the urban planner he will still start with designing a road but maybe you start by saying no let's do human green corridors first and then we'll talk about the roads about how they fit around those human green corridors and let's as designers would say create an invitation so that people really want to walk they really want to cycle they're
not even on the side of a road they don't have to go near a road so there are the opportunities and we're in one of the most beautiful and one of the nicest climates in the world so we have opportunities that you just don't have in a normal urban planning setting to change Mobility to massively reduce the importance of of cars but to bake that into the how we plan from the very beginning and that's very
unusual as you know there are many refugees in Kenya from other countries is there a possible Vision where a special Enterprise zone is built for them it becomes a real functioning City or is it simply not profitable too many obstacles or can you think of doing that diversity as you know if you look through history the cities that really prospered that made a difference that were hugely Innovative they were diverse
they were safe havens from people for all kinds of backgrounds including foreigners perhaps even people that have been persecuted in other environments so this diversity this mixing of people this Crossroads concept This Global Marketplace embedding that in everything you do is vitally important so you need mosques for example we want to have a big Somali Community here if we want
that we need specialized infrastructure for them we want to be the main hub for Chinese investment in the entire region so we need specialized institutions we need to pay respect to Chinese culture we need to listen to them work with them on quite nuanced issues sometimes so you definitely don't want to go into any kind of segregation along those lines what's the aesthetic vision for T City
you know we're in one of the most beautiful countries in the world we're in a country with huge cultural diversity and a very vibrant and distinctive culture and we have a clean sheet of paper so from a design and aesthetic perspective we want this to be a Kenyon City we don't want this you walk into tart and you think well this is a bit like Dubai or this is a bit like santon and Johannesburg that would
be complete failure for us but what does that mean concretely what would I mean I'm here now but what do I notice as a visitor or I say that makes this a Kenyon City so the way we're designing our CBD there are a lot of subtle cultural references from different kuuya but also other tribal groups and CBD Central business district right yes so what would be a reference of that kind it could be the facade of a building it
could be the pattern on in a in a plaza it could be who designs and the cultural references in a major sculpture here mumet Tre is is very sacred so the C we will be moving a massive historic and culturally important mum Tre into to the center of the plaza and then the other element is making it very green very walkable and very beautiful and very safe and baking that into how we plan
the city from day one really committing in a very deep way to those principles generally they're quite superficial in modern cities and this's this because you're constrained by the old city there's this huge element of retrofitting we we don't need to do any of that but you need to embrace those principles in a very wholehearted fashion takes more time takes more effort but the payoff I think is going
to be massive in the medium term let's say you put aside budget constraints forget about your shareholders you're thinking unrealistically you're up at night excited about something you know you can't do but what is that something aesthetically I'll answer the question but we don't think like that sure so sustainability means it's commercially viable so you have a lot of City projects that are
massively subsidized by governments particularly in P States our models are exactly the opposite it doesn't matter what we want or what we might want to pay for it matters what our developers and our clients and our residents what do they want and what are they prepared to pay for so we can bring all kinds of ideas of ours and all kinds of costs but it's you can't do that and it's wrong to try and do that so we don't try and
impose Solutions or levels of infrastructure people don't want or styles that people don't want it's probably not how we look at things there's things that we think our residents will want that are hard to bring so let me give you an example you can have good schools that the community is happy with or you could have a worldclass school and in my view there's a qualitative difference between those
two because if you have a worldclass school you will bring worldclass professionals the best Professionals in the world and whatever that industry might be they'll want to come to your city cuz that their children can go to a school that's as good or better than anywhere else so that that's the kind of thing that challenges us putting aside all questions of politics if you just think of constraints on the business
side of what you're doing what's the biggest constraint you face biggest constraint we face is human capital we're obviously not Lang constrained we're unleveraged we have very good cash flow we have very good financing Partners we're absolutely not Capital constrained in any way so we're trying to do some worldclass infrastructure worldclass execution worldclass buildings worldclass technology and by
definition a lot of the human capital to do those things it doesn't exist in this market City scale Landscaping Urban realm these schools don't exist so you either have a lot of foreign Consultants fly and fly out they're not particularly focused they're not necessarily the best consultants in the world and it's just extremely inefficient yeah the constraint is embedding world-class
technical people within a Kenyon team and what's the key variable that will determine whether the talent question goes well for endeavor or goes not so well like what is that in Japan a lot of the experience in doing the same thing in other businesses and other contexts which you know I've been doing for 30 years now you have to spend a lot of time you have to spend a lot of your time identifying those people
checking those people persuading those people and integrating those people it's very easy to to hire you know some very senior development manager but it's very hard to find the right person who's going to be committed to your project who will integrate your team and train train local professionals so it takes a lot of time and a lot of judgment and what question you ask people to try to determine if they're that young
professional who wants to devote his or her life to building out say tat City yeah we're not you know interviews it's pretty well documented interviews are a very inaccurate way of of selecting and evaluating people but it's often what you have we'll check their prior work in a lot of detail and we'll spend a lot of time with them and we'll put them in a lot of situations without them actually
knowing that would we're deliberately doing that to see how they will react how they will react with our local staff or our it might be a dinner after a long day when they think it's time to relax but we're actually looking to see how they interact with our clients do they listen are they respectful are they really interested or are they just going through the motions so a lot of the
recruitment information comes away from the interview process how do they behave when you're actually negotiating their deal are they timely are they honest do they play games do they change their position so we rely on a lot of those kind of data points putting aside tat city which is your favorite part of Nairobi and what about it you find so interesting it's one of the most lovely countries in the you know I've been to
over 100 countries coming from New Zealand I know what a beautiful country is you have incredible diversity of environmental amenities here so amazing national parks but very diverse from Desert like areas to Massa Mara you have incredible Coastline you have incredible cultural diversity but say in Nairobi what what gets you excited about Nairobi other than improving upon it yeah getting on
my bike with a few friends on a Sunday morning riding for 60 70 K through just idelic diverse Countryside why do you think the cost of living in Nairobi has so much skyrocketed lately everything's inefficient government's inefficient but there's a Delta issue and there's a levels issue right so is it food prices Energy prices or what's going wrong at the margins yeah clearly given the structure of the Kenyan economy the
external shocks have been very unfavorable so fuel is imported here and grains are imported here so theyve been the big two short-term drivers and and clearly that they will unwind now to some extent how should Nairobi fix its traffic problems well so far they've done what everybody does and they've built more and more capacity and as everybody out knows more and more capacity creates more and more demand so
it achieves nothing and it's actually clogged up the center of the city more and more clearly there should be congestion charges as there should be be everywhere but it's harder to do in low Tech settings or do you think it can be done I don't think through smartphones I think technology is really it's like so many economic problems they're technically easy but they're politically
complicated and obviously people try and blame the technology no the technology exist it's developed a long time ago it's ubiquitous but there's not the political will to apply that technology so the city will get more and more congested can a subway system be built so most of the rest of the developing world has been through exactly the same problems they're really problems of governance the 99% problems
of governance water power Municipal transport these are all governance problems not technical problems Urban realm we know that these problems can be addressed in my view the government issues here and in most of subsaharan Africa mean that these problems won't be solved for the next 25 years at least hence the demand for new Modern urban environments should we be trying to
title our land in Nairobi and in Kenya or is it more efficient when you have a sector with Untitled land lower prices less formality arguably less regulation what's the right way to think about the land titling issue you know Stigler said all regulation is Al devised so the inefficiency in land titling and land offices is very purposely uh designed to to be inefficient and to facilitate corruption and cartels and land offices
so it's a huge source of rents the canyons are in the process of digitalization they can digitalize the whole thing and create transparency in their sleep probably in 6 months it's a question is there the political will to deal with those cartels and the rent Seekers who are benefiting from the ex in system but you think it is an ideal to title everything even though rents probably would go
up no absolutely it is I mean lack of land poor enforcement and definition of property rights is one of the biggest barriers to development in in the region as you know Kenya has many different ethnic groups tribal groups if you think about the prospects for Kenyans all truly thinking of themselves as a single nation what variable does one track to see how well that's going I mean is it the soccer team is it what music they
listen to is it something about politics it's probably urbanization um because once people move into an urban setting those tribal barriers and differences they gradually melt away and you can see that and and you're going to see it this week in our office most of our staff they grew up in an urban context but you're not going to distinguish anyone by their tribal background because they they're living
together they're working together so I I think through urbanization those barriers are really they've already eroded massively the politicians like to stir them up every election cycle but the underlying integration I think is is very pronounced I think it's much less of an issue than the outside world probably thinks is there a risk that Kenya becomes too topheavy with Nairobi
overdeveloping the way arguably London has Vienna has in Austria how are the second and third cities doing in terms of health or certain amount of political balance yeah no the incentive structures are profoundly different so UK and New Zealand have the highest proportion of tax revenues that go to central government so it creates this huge bias towards development in the in the capital city and centralization so
here we have a very devolved Constitution and with that Devolution a lot of revenues are given to the local counties so the structural reasons for that concentration in the likes of UK don't exist here and then at just a practical level you drive around you see phenomenal development all over the country but it's 47 counties right isn't that too many there's too much Devolution over time economies of scale
it'll evolve back if only de facto to being a smaller number of counties what's the right way to think about optimal federalism for Kenya there's too much there's too little yeah we know that Switzerland is the most devolved country in the world and we also it's it's one of the most efficient and we know that New Zealand and the UK are the most centralized and that model is not exactly
working I don't think there's any right answer and a lot has to do with culture and experience and skills that are developed you know Devolution this degree of devolution is quite new here it's going to take decades for it to really work efficiently so I think it's much better than the centralized model vastly better it's this short-term transition costs but medium-term I think it's going to be really great how many
counties there should be I don't know and I don't think anyone else really knows either okay demographics in Nairobi I read total fertility is 2.5 that's quite low for Africa how did it get there how does that shape economic development for Kenya yeah so it's one of the really amazing things about what's happening in Africa birth rates are falling very quickly across the continent virtually
everywhere with the exception of a few places places like njer and that decline is accelerating and it's falling faster the the forecasts are revised pretty regularly now and that's birth control later marriage what is it usual factors or something different I think it's the same factors that have driven this incredible reduction of birth rates across the world and as the likes of Charlie Robertson have said the
Democratic dividend really kicks in when birth rates fall from say three and a half to 2 and a half that's when people can save that's when dependency ratios really start to improve and Kenya is at the the Vanguard of that process across this region so that demographic dividend is really going to kick in over the next 10 years as they move towards 2.25 2.3 kind of birth rates what should Kenya do
to boost productivity in Kenyon agriculture these are all the easy questions right you know for for but it matters a lot to have that saving Surplus that later funds industrialization so I don't think there's a problem in any of these countries that hasn't either been solved well or poorly many times in other countries so we know where there's been successful agricultural revolutions you know more recently in
country countries like Brazil for example where there's this very sophisticated and and effective interplay between government institutions R&D application of new ideas and the private sector so the government has a very important enabling role if you want to optimize that agricultural transition but what what does that role consist of what should they actually do it consists of very
specialized research and development which is specific to the crops climate seed types and so forth that are relevant here as you saw in Brazil it's partly to do with infrastructure cold chain these kinds of issues so it's the government playing a catalyst role but at the same time getting out of the private sector it's a subtle balance which at the moment Kenya probably isn't particularly good at how can Kenya have
better risk sharing against drought which is a recent problem right presumably some of it comes from climate change a lot of it's external right the weather is going to be what the weather will be some of the R&D ideas so you know Brazil developed hybrid strains of grass and crops that were more drought resistant so you need that R&D element so that your agriculture can adjust to these new
climate conditions and it's a problem that's it's hard for the private sector on its own to solve so ideally you need this interplay with really well-managed scientifically enabled government institutions and the private sector could sector is very strong in flowers and horiculture here but most of the heavy lifting has been done by the private sector so there's some issues where there is a role for the a bigger
role for the government to play have the universities done enough in terms of agricultural R&D they've contributed there are success stories no flowers are it's a massive success story but I think there's more that can be done there as well yes what could can you do to develop its tourism resources more effectively a lot and very quickly it's again it's an area that we've studied
and we're benchmarked against the likes of say Costa Rica which has similar amenities but has had a tenfold growth in in visitor numbers so the tourist assets here are amongst the best in the world and they large scale but the promotion and the support for infrastructure has been extremely poor visitors come to Kenya and they are just completely blown away but so many people don't understand the quality of that
visitor experience so there's a lot of work to be done and it's not difficult work and it's work that can be done very quickly to promote and support in some key infrastructure areas including transport and Air transport as a business person how do you think about when is the right time window for entering an African Market yeah that very much depends on your product your time
Horizon and the effort that you're going to put in I don't think you can J generalize about that but you were here quite early right before it was obviously a good idea and what are the other countries that endeavor is operating in but our business model is about being a Pioneer and dealing with issues that probably a lot of other investors don't want to deal with and getting set and getting in the best
position on in surfing terms whether we want to be exactly where the waves going to break before anybody else we also have an asset class where we're trying to line you know 30 40e asset class with a 30 40e transition so it made sense for us to come early and to commit very early but that's not necessarily the case for everybody else why are there so few you could call them Perpetual projects in Africa projects
designed to run on more or less forever I don't think there's so many Perpetual projects anywhere there's not so many projects that literally have a 50-year Time Horizon because there's not really very much 50-year Capital private PE money is supposedly seven years but you have to sell before the seven years so p is really 5 years and people think of that as being long-term capital DFI money DFI
say they have long-term they don't have long-term capital at all it's one of the many myths about dfis they do have to generate a return they do talk about exits they don't go into 30-year projects so yeah that's very unusual I think anyway thinking in terms of perpetuity you view that as comparative advantage or risk or you're all crazy or some mixed of those or it's the vision of Founders or it's definitely a
comparative advantage because on every Dimension you're trying to find less competitive spaces so you've definitely got a need to build these very long-term projects and there's virtually no Capital available so that gives you a Competitive Edge it's very hard for somebody else to come in and spend billions of dollarss on a 40-year project it could happen it's very unlikely but within Endeavor there then
has to be some higher level of trust at some level relationships with investors or who's funding you or how do you think about the different pieces that go into ravor having that comparative advantage you know any really good business has alignment so it has alignment with its capital structure with its values with the selection of its you know your senior Executives it's no use having a
40-year project and you have some guy who's he wants to make all his money in the next 2 years there's an underlying inconsistency there and capital structure and shareholder identity is vitally important it's very easy to bring someone in they're very excited about the project they'll help fund this module or that module they know someone who can help us with something but the guy's got a or the woman has got a
5-year view 3 years down the line we got a problem cuz he's trying to get an exit or he's trying to get some more cash out of something where it's not optimal in an MPV sense so being very disciplined about shareholder selection is extremely important I take it to be your view that economic development is in some sense the default it's not automatic but there are forces pushing economies in that
direction if you had to reduce that view down to your most fundamental belief like where does that view come from well it started in New Zealand working with you because we we saw how a country could be changed and we saw how growth could be catalyzed I guess that opened my mind to to change I I have this idea that humans evolved over a period of time when no change happened so we're wired to think
that the world doesn't actually fundamentally change I think that's like a default cognitive default but that's actually it variance with the world's experience since the Industrial Revolution so the experience since the industrial Revolution is a wider and wider group of countries with a more and more diverse set of institutional settings and styles of government have experienced economic takeoff and very
high rates of growth by historical standards so there's a disconnect between the way people think and what has actually happened and my default setting is unless you do things really badly per capita GDP is going to grow and it's probably going to grow quite quickly and that's what's happened in most countries in the world whereas people look at Africa and they look at the past and they have got this default
setting probably nothing's going to change but in my mind the bias is massively to change more change more growth what do you think is the book that has influenced you most it's a very good question I think I've read just about everything in development there's nothing I really like very much MH development is a black box I don't think there's anything that has much productive power there's a lot of
explanations whether they be policy settings location culture I think 90% of them are expost very few of them are predictive some of them are just toies I really like factualized more than analytical it makes it clear that most of the world has been on a very similar development trajectory it's just not sequenced Sweden started early Ethiopia started late but the nature of the
transition and the inevitability of that transition other than very extreme circumstances is kind of the same and what do you think economists get wrong I don't think we really understand development at all cuz if we could predict it we can predict virtually nothing it's just too complicated it's too connected with politics and I think there's a lot of feedback loops and elements of development that we don't
understand properly we certainly can't quantify them because the development is happening in such a wide range range of settings from communism dictatorships through to very liberal systems and with all different kinds of industrial on every Dimensions there's huge range of of variables to go back to New Zealand what is the most positive future in terms of economic growth for New Zealand what
does that look like what should be done well as you know I'm very negative about New Zealand and we have very sadly been a huge underperformer on just about every economic and social indicator you can look at I I think there's a partly a cultural element I've thought that for a long time I used to think that the very high immigration that we had would put some spark and some dynamism back into our society that hasn't been happening
there's no sign you think that's the immigrants who self- selected to going to New Zealand or they're somehow swamped by native kiwi culture or I think it's primary the latter mhm yeah and self- selection people you won't go there if you don't like that culture yeah if you want to go to somewhere more dynamic more competitive you'll go to Australia so that reinforces their culture I see some hope in Mal ewi and
Indigenous businesses MH contrary to what most people would think they bring a different culture they bring a a more open-minded International culture in many ways and they are being very successful but that's a small part of our economy yeah I don't see a lot of Silver Linings if you look back on the New Zealand asset sales of the 1980s 1990s how well do you think they went what did
we learn from that experience you know I think clearly I'm biased I think they exteme they went extremely well and you have to judge that by the productivity Improvement in the likes of telecoms power forestry but these were incredibly poorly managed assets hugely wasteful very low levels of innovation and archaic levels of technology so yeah it Unleashed a lot of value creation but I think you know
societies that can't take the medicine generally don't perform very well so new zealanders are still obsessed with the fact that the 80s reforms there was so many things wrong with them not withstanding the fact that virtually every change has with stood the test of time and hasn't been reversed you see it in the same you know thatches to blame for so many things that are wrong in the UK but if it's so
bad just go ahead and reverse everything she did and I think countries that have been successful they have wave after wave of Reform change Innovation the change is painful the structural adjustment costs but if you're good at absorbing that understanding that and moving on to the next round of change as the Chinese have in some ways that's a huge strength if you can't do that it's
a big weakness at least for a while the New Zealand business Community seemed to be strongly behind reforms Freer markets free trade that's fairly exceptional was that just luck or are there organic forces behind that you know I think fundamentally we'd had quite a entrepreneurial Society people went to New Zealand indigenous people went to New Zealand it was an easy place they had to build their lives they had to
build communities they had to build infrastructure they had to be pioneering in nature they had to be in some sense entrepreneurial and New Zealand ended up as one of the richest countries in the world with one of the best education and one of the best health systems in the world it's in the facts but at some point we put our feet up you know probably you have to go back to the six
and 70s and complacency crept in in many dimensions and the most obvious one is education we had objectively one of the best education systems in the world kiwis were leading thinkers in many areas they were successful internationally but we have one of the worst and most unequal education systems in the oecd today we have third world levels of educational attainment for sub sectors of our community do you have a
sense of how to reform that I think New Zealand is about as as you know one of the most analyzed or over analyzed countries in every area of Reform so it's not a technical issue again every area of Reform the work has been done it's sitting on the shelf it comes back to the desire of society for Change and and the desire of the politicians to implement that change how important is it that it's relatively hard to build
new housing near ockland I know that's Eed somewhat due to Legal changes but still there's a movement right yimi for Auckland and New Zealand is that a major issue or a minor issue it's a horrific issue ockland has some of the least affordable housing in the world I think number five last time I worked yet only 2% of New Zealand is built upon it's just massive Paradox and you know we're meant to be
the country that believes in a fair go but it's hugely hypocritical if you're a bus driver you're never going to buy a house and a huge proportion of your income is going to go on rent the biggest source of inequality quality in New Zealand is housing costs which through regular through change could be fixed just look at Tatu City we can build a good apartment that anyone would be happy to live in for
$35,000 in Oakland that's going to cost you $400,000 and that could be changed in months everyone knows Queenstown Milford Sound but what's the most underrated part of New Zealand well you taranaki are you going to tell meet staki beautiful places off the Beaten Track yeah North somewhere in the North Island there's gorgeous Pockets everywhere through that absolutely beautiful country yeah with lovely
really friendly people and very diverse and specific you know environments so yeah if you're going there you should go to the tourist highlights but go to the off the Beaten Track and you'll see so many wonderful beautiful places and you'll meet a lot of very friendly people and growing up in Taran in particular how did that shape you in your views right you're not from Auckland you're not from
Wellington Outsider within New Zealand I was at the end of that pioneering period where you grew up with grandparents who' lived through the depression and had lived through the war and the values that would engendered in that period would I was at the tail end of when that was being passed on to people and at that time New Zealand was a leader you felters in New Zealander we were we
could take anybody on and we could beat them whether it was sport economic performance even areas of innovation that's always been part of me how do you think playing rugby early on influenced how you approached the world it was more that when you played rugby it was competitive you know from a very young age in terms of you know it was very monocultural so it was very limiting in a way but it was very
competitive it was serious you had to train it didn't matter what the weather conditions were you were going out in your bare feet and playing and you were going to enjoy it and you did enjoy it so yeah attention to detail training you know it's a paradox the old blacks everyone expects them to be the best team in the world and to prepare and play to the nth degree but we we're not like that in everything else we do
it's a weird Paradox we've got so you picked some of that up as a child what do you find inspiring about rugby and Kenya well we went and watched the children from slums rugby Villages children uh playing I find it enormously inspiring I see the the shared Joy uh that that children have of just being supported to go out and kick a ball round but I I see their skill levels I see their their dedication they they're
physically tough they want to train they want to learn they're not grumbling they're not they are physically strong and there were no parents there right yeah reminded me of my childhood they not being babied it was pretty full on the girls was pretty full on they were getting knocked around and bruised but they were loving it they were lapping it up if you think about New Zealand
culture Cinema books music what is it from New Zealand culture that inspires you or has stuck with you you know we were very strong in a lot of areas AK kiwi split the atom AK kiwi was the first person to climb Everest yeah economically we were top three in the world so and as I said things like Social Services we were a leader so yeah why not be the best you know why not go the extra mile
why why be mediocre with anything and why think that Kenya can't take the world on I guess I guess that's a very dominant part of my thinking I genuinely and 100% believe anything is possible in Kenya just how determined you are how organized you are what is it from Russian culture that is stuck with you yeah quite quite a lot I would say yeah not prejudging people not believing in stereotypes really doing your
homework and understanding issues deeply and the history of issues and how history is shaped how people think and how they behave before you judge them or let alone try and influence them resilience intellectual capacity yeah I learned a lot if you had to contrast kiwi culture and Australian culture how would you boil that down to the smallest number of Dimensions I think Australia is much
more competitive they they're comfortable being competitive kiwi are very polite and cultural surveys show this we're not very assertive at all we find Australians offensive because they're in in your face but they're actually just telling you the truth and they're cutting to the Chase and they're getting stuff done so it's I think time is shine they've turned out to be a much more Dynamic outward looking competitive
and vibrant economy we're very closed we're one of the most restrictive countries in the world for FDI but yet we're meant to be friendly hospitable people so that full-on competition that in yourf face kind of culture it's I think it's very different on each side of the tasma now and how long have you lived in Kenya now I've been coming here for 15 years a lot and my wife and I have been living here
for 3 years and putting aside all the projects the business and all that but just how has living in Kenya changed you yeah we've absolutely out of 10 it's a 10 that's for sure yeah it's a wonderful C extremely friendly people uh very diverse Community gorgeous environment lovely climate but you've got the energy you drive through the local community you can see the energy you can see how every 3 to 6 months it's
changing it's developing there's aspiration right through Society all of Kenya yeah there's huge problems but all of Kenya thinks that this place is going to change and they want it to change amazing work ethic and the chance to do big projects that can be transformational that you don't really have in so many places so a lot of pluses so let's say an educated Westerner who has traveled a lot is
pondering a two-e trip to Kenya putting aside Safari which everyone will do and of course they fly into Nairobi but what else should they be doing or thinking about or looking for definitely the cultural experiences and getting again off the Beaten Track where there's lot not a lot of Tourism maybe not a lot of development very isolated areas where traditional lifestyle is still as it would have been many
hundreds of years ago and you go to the north to do that or all over or you go probably to the far north yeah toana or samburu area yeah and also you're going to go somewhere very beautiful you may not see a lot of lions but you're going to see gorgeous scenery and you're going to see extremely interesting people and on the coast what you what should you do the coast is very diverse so you can go
to where all the people are diani Beach you can go North to lamu which is more the the Swahili experience or you can go south and get somewhere absolutely gorgeous and isolated I had my first dive here a few weeks ago I'm literally in the water for 45 seconds I'm still going down and a 7 m whale shark cruises past me about 4 MERS away so the range of experience here that's so accessible
is fantastic very last question what is the next thing you will try to learn I'm trying to understand and I'm trying to get help my team to understand the best way to manage and work with people in Africa cuz I think we thought we knew a lot but I think there's some things we don't understand as well as we might so how do we get the most and create the most opportunity for our African human resource stepen Jennings thank you very
much thanks so much Tyler thanks for listening to conversations with Tyler you can subscribe to the show on Apple podcasts Spotify or your favorite podcast app if you like this podcast please consider giving us a rating and leaving a review this helps other listeners find the show on Twitter I'm Tyler Cowan and the show is Cowan convos until next time please keep listening and [Music] learning