New Zealand: Why New Zealand’s "Number 8 Wire" mentality is bad for the economy

Last Updated: 13 February 2014
Article by Ian Finch

For those train spotters out there "Number 8 wire" is a gauge of wire on the British Standard wire gauge that has entered into the cultural lexicon of New Zealand.

It has not been sold under that name for three decades, since it was replaced with the equivalent 4.0 mm wire in the metric system. As such it is still widely used in fencing, mostly in strapping or tie-downs1.

The Number 8 Wire mentality on the other hand describes a Kiwi's ability, borne out of isolation, to improvise and adapt in order to solve problems often using more readily available resources such as the (then) ubiquitous Number 8 fencing wire.

In 19th-century New Zealand, Number 8 wire was so important daily papers carried prominent ads for each shipment. "NOW LANDED," shouted The Hawke's Bay Herald of March 15, 1883. "50 TONS ACORN BRAND PATENT ROUND STEEL WIRE, OILED, 6, 7, 8, 9, and 10".

So why isn't the Number 8 mentality good for New Zealand any more?

Reason #1: Borrowing is not always ok

The Number 8 wire mentality was a nation-defining competitive advantage in a pioneering world but often leads to compromise, making do and a "she'll be right" attitude. In a global economy dominated by engineering excellence, good enough isn't good enough.

From a New Zealand Inc perspective, inventiveness dominated by practical trial and error, and incremental problem solving using available resources 2 is most often carried out with no commercial end in mind. That in itself isn't necessarily a bad thing. MIT Sloan School of Management economist, Professor Eric von Hippel, identified end user innovation (that is, development of an invention for a person or organisation's own use because an existing solution is lacking) as the most important source of invention for modern firms, and Kiwis are especially good at it.

However, our borrowing of others IP (which is often justified as being ok because it's for our personal use), means that whatever we develop starts off with a significant impediment to commercial application – freedom to operate issues. Even if what we develop happens to be excellent and commercial, we find we can't legally commercialise it.

Reason #2: Garden shed innovations aren't usually commercial, scalable or replicable

Making do, getting by and even flying by the seat of our pants was essential in colonial days when spare parts and services were far away. But improvisation isn't the same as innovation.

Being able to bash up something in the shed to solve a pressing problem is "admirable", says business analyst Rod Oram "but it's not commercial." According to Oram, if we want to make export dollars, we need to create products and services that are "scaleable and replicable" and that seldom happens in a garden shed. 3

Need an example?

In 1911 the electric street lighting in the Nelson suburb of Brightwater was powered by a small hydroelectric generator in the hills above the city. To switch the lights on and off, a chicken run was added to the power plant. At dusk, every night the hens would go inside their coop and roost on a hinged perch. This sank under their weight and connected a switch which turned on the street lights. At first light the hens would leave the coop, the spring-loaded perch swung back and the lights went out again. 4

While undoubtedly an ingenious solution to a technically difficult problem, New Zealand did not benefit from it in any way because the solution wasn't commercial or pragmatically scalable.

This trend has continued. Three of our most celebrated inventions, the Aquada amphibious vehicle, the Martin Jetpack and the Britten Motorcycle have had limited commercial application / success despite being technologically brilliant.

Reason #3: Even when our innovations are commercial, scalable and replicable, Kiwi's undervalue the act of invention

In a paper prepared for NZTE in 2009 5, Tony Smale identifies a series of behaviours and management practices which have their origins in Kiwi national culture and which he believes act as a significant impediment to commercialisation of our innovative capacity. Chief among these are the so called "tall poppy syndrome" and our constant undervaluing of intellectual assets.

As Smale observes 6, New Zealanders have turned understatement and self-depreciation into an art form. This means:

  • We are suspicious of specialists and specialist knowledge
  • We accord most respect to practical achievers
  • We especially venerate those who succeed against the odds rather than those who achieve commercial success 7

Most importantly, we disbelieve, even in the face of strong evidence to the contrary, in our ability to do world-scale innovation. How often have we heard it said of well-resourced foreigners, "Surely they must have already done it?" This leads to a significant undervaluing of innovation and, in consequence, a lack of IP protection and a perception that IP is, at best, a defensive mechanism rather than an enabler of (broader) commercial development.

This undervaluing of our innovation is costing us dearly. Consider the following examples of world leading and commercially viable innovation that kiwis have given away:

  • In 1884 John Eustace, a Dunedin tinsmith, invented the airtight lid. This invention is still used on containers such as paint cans and tins of golden syrup. He sent his prototype to England to have a die made in order to mass-produce it, but did not take out a patent on it. Soon many British companies began making lids using the Eustace design. One company even offered Eustace thousands of pounds for the rights to it, before realising they could legally copy it for nothing. 8
  • In the 1880s Thomas Brydone and William Davidson pioneered the export of frozen butter and mutton from New Zealand to Britain by retro-fitting a compression refrigeration unit to the Dunedin. At the time, sheep were only farmed in New Zealand for wool. Assorted experiments in refrigerated shipping had been attempted in the mid-1870s - sometimes successful on a small scale - but generally not successful on a larger scale. The first attempt to ship refrigerated sheep meat from Australia had resulted in the loss of the whole cargo. Although founding an entirely new industry, Brydone and Davidson obtained no formal IP protection for the method.
  • A new fruit that became popular in New Zealand from the 1930s was first named the Chinese gooseberry, because the seeds had been imported from China. New Zealand growers began exporting the fruit to the US in the 1950s. It was the height of the Cold War and growers were advised to change the name to make their product more politically appealing. The name 'kiwifruit' was proposed in 1959 and later became standard. However New Zealand growers did not register the "kiwifruit" trade mark internationally, so any country in the world could use it. Italy is now the world's leading kiwifruit producer.
  • The world's first farm bike was invented in 1963 by New Plymouth farmer and keen motorcycle mechanic Johnny Callender. He was swamped with orders but faced difficulties expanding production. His bike used a Suzuki engine, and Suzuki soon built and sold their own version, making it impossible to develop Callender's invention into a local industry.

The giving away of our IP (often in exchange for nothing more than recognition of being the first) appears to be a national trait. Need more convincing? In 2010 we wrote double the OECD average number of scientific papers per million population. In the same period we filed 11 "triadic patents" 9 per million population - one-quarter of the OECD average.

Based on these results one economic commentator warned in August 2013:

"New Zealand has received very few patents compared with other developed countries... Further, New Zealand has also lagged behind other advanced nations such as Finland, Sweden, France and Norway. The low patent count does not bode well for an advanced nation like New Zealand and the country risks losing out in innovation and competiveness in the international market if the situation persists." 10

The poor result may be connected to the fact New Zealand spends about 1.3 per cent of its gross domestic product (GDP) on research and development - far below the OECD average of 2.4 per cent. Public sector R&D spending is also predominantly in primary industries – hardly surprising when one considers that the Government likes to back winners and 70% of our export revenues are for primary products.

What's the solution?

Increasing Government spending on R&D is only half the answer. Even if we increase rates to OECD averages and, like more celebrated countries such as Singapore and Denmark, focus on spending in secondary and tertiary sectors, unless we can shift our focus from initiation (ie inventing and problem solving) which we are currently very good at, to implementation (turning invention into value and business success), an increase in R&D funding may be all in vain.

Smale suggests 5 key strategies for optimising inventiveness:

  • Capturing and exploiting soft capital – starting with an audit of intellectual assets
  • Building relationships with customers – rather than presuming what they want and/or focussing on price
  • Capturing more of the value chain – for goods, by avoiding the tendency to appoint a distributor for foreign markets, and/or by focussing on exporting services or intellectual assets not things
  • Growing talent – by focussing on strengths and implementing succession planning; and
  • Increasing speed to market – by encouraging the use of specialists to compliment trial and error research, developing tactics to listen, learn and fail fast through early exposure of new products / processes to customers, and utilising a full range of financing and market entry options.

To this we would add a 6th: Education. In a 2010 report commissioned by the (then) Ministry of Economic Development into New Zealand IP system, Auckland Uniservices stated:

Ignorance is probably the greatest barrier to the use of IP or to the most effective use of IP. While ignorance of the IP system was not spoken of by the interviewees as a particular problem, (many) problems identified relate in one way or another to a lack of understanding. 11

The report concludes 12:

"Support for New Zealand businesses could be provided in the form of education undertaken on three levels:

  1. the formal education system, particularly at tertiary level;
  2. advice and information provided by the IP profession (including the MED, IPONZ and other Government bodies);
  3. advice and information provided by industry bodies, e.g. IPENZ."

I whole heartedly endorse this recommendation.

In my role as President of the New Zealand Institute of Patent Attorneys, I consistently advocated a top down approach to the role which IP plays in innovation, starting with Ministers and senior officials and trickling down to those Government employees dealing with innovative Kiwis on a daily basis. I also advocated education in schools and Universities so that IP becomes as indoctrinated into our psyche as our ability and willingness to innovate, claim the glory of being first and give away the spoils. It's only through an improved understanding of the value which intangible assets add to a business that we can start to make informed decisions about protection and exploitation and once again take our rightful place at the top of the world rankings for GDP per capita. 13

Footnotes

1http://en.wikipedia.org/wiki/Number_8_wire
2Including funding (which is often sought only from the so-called 3Fs: friends, family and fools) and information (again sought from friends and acquaintances not professionals).
3http://www.stuff.co.nz/technology/8142986/Come-in-No-8-your-time-is-up
4http://www.teara.govt.nz/en/inventions-patents-and-trademarks/page-1
5"Playing to our strengths: Creating value for Kiwi firms" http://www.keanewzealand.com/united-kingdom/news/playing-our-strengths-%E2%80%93-creating-value-kiwi-firms
6At page 16
7Smale also uses the example of John Britten and the Britten motorcycle
8 http://www.teara.govt.nz/en/inventions-patents-and-trademarks/page-2
9A patent filed simultaneously in Europe, Japan and the United States
10PESTLE Country Analysis Report: New Zealand Page 63 OHCP0163 Published Aug. 2013 by MarketLine
11At page 61
12At page 97
13In 1900 we were 1st, in 1950 3rd and we currently sit at 46th.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

James & Wells Intellectual Property, three time winner of the New Zealand Intellectual Property Laws Award and first IP firm in the world to achieve CEMARS® certification.

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