BOOK REVIEW: Serious Fun, by Paul Goldsmith.
He's known as a hard-driving entrepreneur today, but Alan Gibbs used to be part of a small group of politicians and public servants who decided what could and could not be imported or manufactured in New Zealand.
Read a chapter extract from Serious Fun here.
Alan Gibbs’ glory days in the sharemarket are well behind him but his biography, Serious Fun (Random House, $45), contains valuable lessons for investors.
Biographer Paul Goldsmith throws new light on Mr Gibbs’ early influences and career, which go some way to explain his considerable achievement.
For a start he was born into a family that ran businesses – his father Theo (“TN”) was one of the first professional directors and often became involved in company turnarounds, mergers and restructurings.
They were also varied – from sawmilling and manufacturing to retailing – and TN was political active at the highest levels of the National party.
In 1951, TN chaired a Royal Commission on taxation for the Holland government, which rejected the recommendations as being unacceptable in a country that had embraced the welfare state and highly redistributive taxes.
Young Alan absorbed the lesson that his father was “brassed off” with the incompetence of the government and the unprincipled nature of politics – as Goldsmith writes, “the state was more often a menace than a helper.”
Around this time, in the early 1950s, the Gibbs family became business partners with the then Keith Holyoake, who was minister of agriculture, in the development of Kinloch at Lake Taupo.
Sir Keith was later instrumental in Alan’s early career, after he graduated from university, and got him a job as a young diplomat in New Zealand House in London, followed by the prime minister’s office on his return from several years overseas.
The Labour government had lost the 1960 election but had left a legacy of import controls and licensing that the Holland government had only half-heartedly wound back.
In 1965, when Mr Gibbs was posted back to Wellington, he was at the centre of the country’s business decision-making – a small group of politicians and public servants who decided what could and could not be imported or manufactured, and who would do it.
He had also come back from London eager to build a New Zealand-made car based on a low-cost model made by the Reliant Motor Co – a company best known for its three-wheeled Robin (the Gibbs version, known as the Nova, was four-wheeled).
His unsuccessful attempt to persuade the bureaucracy that New Zealand needed another car assembler lasted until 1969, and included at least three letters from Sir Keith, then prime minister, over five months in 1968 to the industries and commerce minister, Jack Marshall, seeking decisions that were not forthcoming.
The end came when the Reserve Bank refused permission to pay a technical fee to Reliant for its work on the project, which lasted five years without selling a single car.
Mr Gibbs says this taught him all he needed to know about the import licensing system, its crushing effect on business and the favours it imparted on the privileged few.
He joined the game briefly by getting his own monopoly on making staplers. He imported machinery from Australia, made a year’s quota of staplers in six weeks, and then sent the machinery back.
Later, as an investment banker, Mr Gibbs was involved in several defences of companies under siege from another new kid on the block, Ron Brierley. Mr Gibbs also learned that a deal wasn’t always a deal.
One involved Bruce Judge, who was running Brierleys at the time.
It involved Ceramco taking over Tappenden Motors, keeping the engineering companies, and selling the car dealer parts to Brierleys. Judge and Brierley refused to go ahead, so Mr Gibbs, who knew Tappenden inside out – “better than its own directors,” in his words – bought the business himself with partners Charles Bidwill, John Fernyhough and Warren Paine.
Thus began one of this country’s most powerful business groupings that resulted in Tappenden becoming part of Freightways, Mr Gibbs going on to push free market policies inside the National Party (again without success), and launching corporate forays as the import licensing was unwound (Atlas Majestic, Bendon), broadcasting deregulated (Radio Hauraki) and industries restructured (Ceramco, Freightways, Lion Breweries).
All this occurred before Mr Gibbs was called back into the political arena by long-time friend Roger Douglas (during a brief “hippie” period, Mr Gibbs was a “green” socialist), who had embarked on a series of reforms in the public sector.
Mr Gibbs sums up that period this way:
“My whole business experience has driven me to free markets…Over the years in running businesses in a highly regulated New Zealand society we found the great majority of one’s energy was spent either running up and down to Wellington to get permits or licences, or alternatively it was spent with one’s lawyers trying to find ways and means around the regulations. The net effect of that was probably over half of the most creative energies in New Zealand were frustrated.”
That changed when Mr Gibbs got his first public appointment to the Forestry Corporation Establishment Board in December 1985. The story is told in the second half of Serious Fun.