Gina Rinehart on the future of mining and prosperity in Australia

Many in Australia may not like the way Gina Rinehart, the billionaire mining owner is going for Fairfax Media however, what she has to say about mining and the future prosperity is critical.

The latest data is showing that more and more businesses are going bust in the non-mining states like South Australia, Victoria and Sydney. And the carbon tax and mineral resource tax along with red tape and immigration issues will kill the mining states. Within no time Australian citizens may lose the wonderful life they have now. We cannot take these things for granted.

It seems too easily forgotten that people who know what it is to hire people – even thousands of Australians, also understand better than most what could prevent them from doing so. While I have many investment options in a globalised economy, the place where I most want to create sustainable jobs is Australia.

Yet others are increasingly feeling forced to make a different choice.

West Perth, where my offices are, for instance, is filled with companies investing in low-cost, highly resourced Africa.

Now the evidence is unarguable that Australia is indeed becoming too expensive and too uncompetitive to do export-oriented business (businesses that must sell their product in the world economy at world market, not Australian, prices). What was too readily argued as the self-interested complaints of a greedy few is now becoming the accepted truth, and, more ominously, is showing up in incontrovertible data.

ANDEV members and I have been voicing our concerns and warning about this over the last two years. What hurts business can devastate our already grossly in-debt nation.

Elon Musk on Space X costs

The innovation, risk and creation of a new private sector space agency is phenomenal.

So when I started SpaceX, it was not surprising when people said we wouldn’t succeed. But now that we’ve successfully proven Falcon 1, Falcon 9 and Dragon, there’s been a steady stream of misinformation and doubt expressed about SpaceX’s actual launch costs and prices.

As noted last month by a Chinese government official, SpaceX currently has the best launch prices in the world and they don’t believe they can beat them. This is a clear case of American innovation trumping lower overseas labor rates.

I recognize that our prices shatter the historical cost models of government-led developments, but these prices are not arbitrary, premised on capturing a dominant share of the market, or “teaser” rates meant to lure in an eager market only to be increased later. These prices are based on known costs and a demonstrated track record, and they exemplify the potential of America’s commercial space industry.

Here are the facts:

The price of a standard flight on a Falcon 9 rocket is $54 million. We are the only launch company that publicly posts this information on our website (www.spacex.com). We have signed many legally binding contracts with both government and commercial customers for this price (or less). Because SpaceX is so vertically integrated, we know and can control the overwhelming majority of our costs. This is why I am so confident that our performance will increase and our prices will decline over time, as is the case with every other technology.

The average price of a full-up NASA Dragon cargo mission to the International Space Station is $133 million including inflation, or roughly $115m in today’s dollars, and we have a firm, fixed price contract with NASA for 12 missions. This price includes the costs of the Falcon 9 launch, the Dragon spacecraft, all operations, maintenance and overhead, and all of the work required to integrate with the Space Station. If there are cost overruns, SpaceX will cover the difference. (This concept may be foreign to some traditional government space contractors that seem to believe that cost overruns should be the responsibility of the taxpayer.)

The total company expenditures since being founded in 2002 through the 2010 fiscal year were less than $800 million, which includes all the development costs for the Falcon 1, Falcon 9 and Dragon. Included in this $800 million are the costs of building launch sites at Vandenberg, Cape Canaveral and Kwajalein, as well as the corporate manufacturing facility that can support up to 12 Falcon 9 and Dragon missions per year. This total also includes the cost of five flights of Falcon 1, two flights of Falcon 9, and one up and back flight of Dragon.

The Falcon 9 launch vehicle was developed from a blank sheet to first launch in four and half years for just over $300 million. The Falcon 9 is an EELV class vehicle that generates roughly one million pounds of thrust (four times the maximum thrust of a Boeing 747) and carries more payload to orbit than a Delta IV Medium.

The Dragon spacecraft was developed from a blank sheet to the first demonstration flight in just over four years for about $300 million. Last year, SpaceX became the first private company, in partnership with NASA, to successfully orbit and recover a spacecraft. The spacecraft and the Falcon 9 rocket that carried it were designed, manufactured and launched by American workers for an American company. The Falcon 9/Dragon system, with the addition of a launch escape system, seats and upgraded life support, can carry seven astronauts to orbit, more than double the capacity of the Russian Soyuz, but at less than a third of the price per seat.

SpaceX has been profitable every year since 2007, despite dramatic employee growth and major infrastructure and operations investments. We have over 40 flights on manifest representing over $3 billion in revenues.

These are the objective facts, confirmed by external auditors. Moreover, SpaceX intends to make far more dramatic reductions in price in the long term when full launch vehicle reusability is achieved. We will not be satisfied with our progress until we have achieved this long sought goal of the space industry.

Engineers get it done

SD: Is Agile management really new?

RC: We have known for over 50 years that participative management is far superior to traditional legacy management. We’ve got a whole discipline of humanistic management that has come out of the work of Maslow and McGregor. But it’s had very little impact on organizations. It changed the style but it didn’t change the substance of management.

It’s ironic that as we watch the substance of the current management shift, especially over the last decade, it’s coming from the engineers. Who would have thought that the change in management would come, not from psychologists and OD specialists but from the engineers? The Agile Manifesto was written by software engineers. The new paradigm is being created by engineers like Sergey Brin and Larry Page at Google. Bill Gore at W.L.Gore was, in 1958, way ahead of his time in developing his lattice organization where there were no supervisors: his background was also engineering. It’s ironic while the psychologists and sociologists identified what was needed, the engineers are actually getting it done.

Steve Denning and Rod Collins

The Right to Education Act and Gujarat

Gujarat is a real path breaking state in India. If only the other states can learn from Gujarat.

From Firstpost:

Instead of focusing only on input requirements specified in the Act like classroom size, playground, and teacher-student ratio, the Gujarat RTE Rules put greater emphasis on learning outcomes of students in the recognition norms. Appendix 1 of the Gujarat Rules is the one which has a path-breaking formulation for recognition of a school: this will be a weighted average of four measures:

Student learning outcomes (absolute levels): Weight 30 percent.
Using standardised tests, student learning levels focussing on learning (not just rote) will be measured through an independent assessment.

Student learning outcomes (improvement compared to the school’s past performance): Weight 40 percent.
This component is introduced to ensure that schools do not show a better result in (1) simply by not admitting weak students. The effect of school performance looking good simply because of students coming from well-to-do backgrounds is also automatically addressed by this measure. Only in the first year, this measure will not be available and the weightage should be distributed among the other parameters.

Inputs (including facilities, teacher qualifications): Weight 15 percentStudent non-academic outcomes (co-curricular and sports, personality and values) and parent feedback: weight 15 percent.
Student outcomes in non-academic areas as well as feedback from a random sample of parents should be used to determine this parameter. Standardised survey tools giving weightage to cultural activities, sports, art should be developed. The parent feedback should cover a random sample of at least 20 parents across classes and be compiled.

This is one of the first times in India’s history that public policy has focused on children and parents, instead of focusing on the public sector producers of education services.

Solar Force: the effect of Sun on the climate

A very well researched documentary on the plausible theory of how the sun effects climate change rather than CO2. For me, this kind of thinking is quite important. Irrespective of which theory is right we have to look at creating a better environment, diversifying our energy sources as a goal of national security, having a cleaner environment, and working towards managing the effect of climate change on the Earth.

 

However, what we should not do is let governments create carbon tax or carbon trading legislation which provides a lot more power in the hands of the government, more legislation and regulation and more chances to make mistake. Also, it provides more tax dollars to create special interest groups, for transfer of payments to influence voting and other ill effects of being part of a democracy.

 

 

 

WSJ ECO:nomics

A really interesting series of articles and interviews from the Wall Street Journals conference on creating environmental capital.

 

How to create innovation in an existing organisation?

Innovation is one of the toughest things to do in a planned way and in some sense that is the most important thing needed. Large organisations struggle to do that be in they in the private, public or not for profit sector. Small start ups thrive on change and innovation. How do we create new innovation in existing organisations?

Govindarajan and Trimble (requires free HBR registration) writes about creating a new innovation engine in an existing organisation. Is this enough? Of-course not but they are suggesting a organisational structure that create the norms and environment for innovation to flourish.

An innovation initiative is best organized as a partnership between a dedicated team and the group that handles ongoing operations, the performance engine. Although conflicts between partners are inevitable, they can be managed, by following three steps:

Divide the labor. The performance engine should take on only tasks that flow in parallel with ongoing operations—along the same path, at the same pace, and with the same people in charge. All other tasks should be assigned to the dedicated team.

Assemble the dedicated team. Leaders must approach the dedicated team as if they were building a new company— from scratch. Breaking down existing work relationships and creating new ones is an essential task, which outside hires can help expedite.

Mitigate the conflicts. The innovation leader must take a positive and collaborative approach to working with the performance engine and must be supported by an executive senior enough to prioritize the company’s long-term interests and adjudicate contests for resources.

An Alternative to Alternate Energy

A realistic look at energy options from a US point of view by T. Boone Pickens.

He believes in global warming, lost $150 million investing in Wind Power energy and believes that Natural Gas is the best solution right now. Do see the Q&A at the end. Australia can learn a lot through this. What are our choices here?

The Key to Fixing Global Warming? China

A very sensible article and strategy from Stephen Chu, the Energy Secretary in the US. Simple, pragmatic and politically feasible. Unlike Australia’s Carbon Tax. (This is from a couple of years old but still very relevant).

Huge international climate deals are vexing. It would be simpler, Steven Chu says, to get the US and China to agree on cuts. Other nations would then follow.

We’re all designers now. – John Thackara