I didn’t quite manage to graduate from university, but I can’t say I didn’t try.
When I was about 20 I attended the WA School of Mines but the director talked me out of studying geology. The view at the time was that there wasn’t much of a future for mining. He was nearly correct for the next decade. In my mid-20’s I studied electrical engineering. I did this five nights a week for several years. But my father had a serious heart attack and I was called to the family business.
The third go I took was in my 50’s, when I tackled geology and had a great deal of difficulty. Strange, because my mother was the first woman at the School of Mines to study geology and chemistry. That was in 1923-24 and, according to Geoff Murphy, she gained credit passes. She had some difficultly enrolling as there were concerns about the language she would hear in the classroom. She promised not to listen, so they let her in.
Perhaps I should threaten to go back again (would Eddie Johns be my lecturer again? Only kidding!).
In this speech I’m going to touch on:
- Early ventures with the ATO
- King Croesus
- Education for survival
- Why I am an optimist
- The secret of economic success (which I’m still learning).
It’s been said that I like history. I actually hate history as it takes your mind off the future, which is where we all want to be. I am interested enough in history, however, to assure you that absolutely nothing happened on the Goldfields until the late sixties.
The nickel boom
That’s when the nickel boom arrived. Until then everything was predictable, but all the rules suddenly changed. I was thoroughly enjoying life until the early 1970’s.
During the early 1970’s, the Australian Tax Office (ATO) developed a dispute with me by assessing tax on some mining vendor shares when their current market price was $8 each. Vendor shares, as you may know, can not be sold until the period of escrow expires. By that time they were not $8, they were 15¢ each. However, the ATO felt that this drop in value was irrelevant so they continued their efforts to extract this fictitious sum of money, on which they were charging 10 per cent interest. The annual interest was more than my salary.
Despite my many requests that they take me off their mailing list, they did not oblige and about the only polite letter I got from them during the next 15 years was one announcing that the interest rate had been raised from 10 per cent to 20 per cent. This of course was of no interest to me.
It was during that time that I adopted the motto: “if socialism works, I won’t”. I dropped out of the productive workforce and enjoyed what I will probably come to regard as the most interesting period in my life. My time was busily spent in writing letters to various editors and forming new political parties. I travelled overseas to run hotels, explored for nickel and wrote a story entitled The Alienated Australians. In it I interviewed 27 other Australians who had been blown out of the Australian workforce by the heavy hand of the bureaucracy. They were all enjoying successful careers in other countries where they were able to move so much faster, without the bureaucratic burdens of Australia.
However, all good things come to an end and I started to feel that I really had to have a proper job. It was particularly embarrassing for my children when they were asked, “but what does your father really do?”.
Socialism doesn’t work
I also realised that my motto just didn’t make sense as socialism has never ever worked. Socialism is parasitic and needs a fresh supply of victims to exist. In the long term, it just runs out of victims.
This led me to write politely to the Commissioner for Taxation in the mid 1980’s and suggest that if they tore up all their previous files, I would be prepared to re-enter the productive workforce and allow them to pursue their speciality of plundering yet another pay packet.
They found this offer too good to refuse and this gave me the opportunity to reactivate some almost forgotten skills in floating a publicly listed mining company which I called Croesus Mining NL.
The story of Croesus
Now why pick a name like Croesus, a word that very few could pronounce let alone spell? Croesus was the King of Lydia, now Western Turkey, between 560–546 BC. He was noted for his great wealth, hence the term “rich as Croesus”.
Anywhere in the world where there is mining there is always a Croesus Hill or a Croesus Nob or a Croesus Shaft and in Kalgoorlie there is a Croesus Street where I live and the Company has its registered office and operating staff based in my kitchen for the first couple of years of its life.
There are two other aspects about King Croesus that I would like to mention as they have relevance to today’s audience:
- He had some good survival strategies, but overlooked a few small details.
- He had a keen sense of the correct role for Government, in money matters.
As a means of survival through good and bad times he formed many joint ventures with neighbouring countries in much the same way as we currently joint venture many of our mining properties. It gives us tremendous leverage.
By doing deals with many of these partners he raised Lydia to the peak of its power, conquering Creek coastal cities and extending his empire to Central Asia Minor.
Here is one of the stories of how he ultimately met his end. He and some joint venture partners were waging war against a neighbouring King, right near one of the corner pegs between nations. The record has it that there was a huge fire right near the corner peg and at the last minute, one of his joint venture partners pulled out of the deal and joined forces with another. They quickly ran a spear through Croesus, who then fell in the fire; and that’s how they invented shish kebabs!
Another more scholarly version is that around 546BC a young Persian corporate marauder, who later became known as Cyrus the Great was having a great deal of success with his corporate take-overs because he had developed the technique of allowing conquered people to keep their jobs and their own corporate identity.
This technique was noted by King Croesus in Lydia who took it as a sign that the time had come to add a few more tenements to his own Kingdom. He sent to the Oracle at Delphi for advice on how to proceed and was informed that if he attacked he would destroy a great empire. The Oracle had given a typically enigmatic message, as it later turned out.
Croesus’ first battle on open ground with Cyrus the Great did not go well for him and Croesus retired to his homeland for the winter, as was customary. On his way home Croesus alerted the Egyptians, the Babylonians and the Spartans that come spring they would all march together and destroy this “up-start” named Cyrus.
Cyrus wasn’t in the mood to wait for spring. As Croesus’ army was beginning to disband for the season, the Persians marked up to the gates of Sardis, the capital of Lydia. Although Croesus’ defenders were always ready for attack, Cyrus tricked them as he had a secret weapon.
Instead of riding to the attack on horseback his soldiers were mounted on camels, the sight and smell of which spooked the more traditional mounts of the Lydian cavalry and the defending army was driven back into the city.
Sardis was widely regarded as the most impregnable city in the world at that time because of its location at the top of the steep hill and Cyrus thought he had been beaten. Then, after more than two weeks of the siege an odd accident gave Cyrus the key to the city. Watching a point near where the hill was steepest and least protected (because it was considered unclimbable) one of the Persian soldiers was surprised to notice a sentry on the wall lose his hard hat over the side and, rather than go to the quarter-master for anew one, he scrambled down the hill to retrieve it. This revealed the presence of a secret pathway. Following this route the next morning, before light, the Persians entered the city in single file, killed Croesus, and claimed his legendary treasures. The “Great Empire” the Oracle had referred to had been Croesus’ own.
As so often a whole corporate empire crumbled because they had not practised Total Quality Control. Insufficient investment had been made in training every single member of the staff. Even the best survival strategies can come unstuck because of lack of attention to one tiny detail.
The second point worth mentioning about King Croesus is that he was the first ruler in the world ever to mint gold coins. This single action in recognising gold as honest money, untouchable by politicians and government officials, could rank equally in importance with Adam Smith’s contribution when he was credited with having invented free enterprise over 200 years ago.
What does the government do anyway?
Adam Smith gave us some guidelines, later refined by economists Bastiat, Von Mises and Hayek as the basis of a Government’s job specifications. Identifying the correct role of Government and controlling Governments to stay within these bounds, is the key to your personal and corporate survival.
There appears to be total confusion in this country as to the correct role of Government, but the problem is worse than that. There appears to be total confusion in what our personal roles should be and what our corporate responsibilities are.
The problem goes right back to our early training. We are not conditioned for the real world. For example, how many of you in this room have developed an automatic response that you will use when you are confronted with a physical “mugging” from one individual?
Of course the success of a perfect automatic response depends on surprising your assailant, so naturally I can’t divulge that secret to you here tonight but you really should know it already. In many, less violent forms, we find ourselves being “mugged” or intimidated in everyday life by the bureaucracy.
Have you often wondered why you let the bureaucrats get away with intimidating you when they fine you for being 15 seconds late with paying your land-tax or when you get a “hurrying ticket” (you could hardly call it a speeding ticket when you are “caught” doing 67 km on the open road).
Well, when this happens to me and they have finished lecturing me from their imaginary moral high-ground I present them with this little Certificate:
“You have just deprived some underprivileged child of their Christmas Dinner. In the same way as you probably do, I put aside a set amount each year to assist those less able than myself.
From this fund I first subtract all the petty fines or penalties that come my way, usually when I am hurrying to catch a plane so that I can generate some wealth that will go toward paying your salary.
My only real wish is that the private sector could be “set free” so it could generate enough real jobs to absorb those currently marking time in the non-productive sector.
Merry Christmas Mr Bureaucrat.”
With a bit of practice, you can develop this into a fine art from. It’s called “Baiting a Bureaucrat”.
Why I am an optimist
This country is in deep crisis but “crisis mean opportunities”, as the Chinese say, and so many of Australia’s larger companies have been driven overseas where they have diverted funds and attention that it has created a whole new string of opportunities for the small to medium size companies right here in Australia.
Unlike South Africa, where the big companies have it all tied up, Australia is wide open and bursting with opportunities for companies like Croesus Mining.
This current mining boom in West Australia will go down in history as being of far more significance than both the “Nickel Boom” or the 60’s/70’s, combined together with the “Gold Boom” of 1986/87.
Compared to last year, Australia’s current year gold exports are rising by 30% to more than $5 billion, with 75 per cent of that coming from Western Australia, with 60% of Australia’s $4 billion total gold exploration expenditure being spent in the West.
If Australia can achieve a 30 per cent expansion of an industry under socialist federal policies; just think what could be achieved with free-enterprise.
The $5 billion export figure is being produced by a total of approximately ten thousand people directly employed by the gold mining companies, so that an increase in employment in this field results in a big multiplier in export earnings, and flow-on jobs, as it is estimated that each person directly involved in the mining industry, generates fifteen additional jobs in the related service industries.
Let me tell you another interesting statistic. Parliament House in Canberra consumes many things and one of them is electricity. The maximum demand figure for Parliament House is nine megawatts, which is more than all the houses and small businesses in the whole of the Kalgoorlie region. Unbelievable but true.
I heard a definition of Canberra the other day: “Two hundred square kilometres; surrounded by reality.”
The writer PJ O’Rourke recently said: “A little Government and a little luck are necessary in life, but only a fool trusts either of them.”
The gold boom
Back to the “Gold Boom” of the West and the reason for it. At the moment there is an ideal set of circumstances that will not continue forever, It is during this window of opportunity that you will see a whole new group of mining companies emerge and take their place on the world stage.
The ideal conditions are:
- A favourable gold price;
- A reasonable exchange rate with the U.S. dollar.
- A pro-development State Government, who at least have some understanding of the benefits that flor from free-enterprise.
- But most importantly of all, is that the industry itself has developed the tools and the geological understanding. These advanced exploration techniques are making mineral discoveries possible in soil covered and lake covered areas, many of which were previously inaccessible.
Croesus Mining, of course, is typical of this new breed of fast moving, emerging explorers and miners.
The School of Mines has to take some of the credit for this. I am personally grateful to the School of Mines, even if it only taught me how to be a good listener.
In our company’s short seven years in existence, we have mined 10 mines, made two successful company takeovers and paid two dividends to shareholders. We have our own young energetic technical team, with which I’m so proud to be working, our own gold treatment plant, some $6 million cash in the bank, but most importantly, we have discovered a good gold resource within easy trucking distance of our mill. We are currently proving up new ore at twice the rate we can mill it.
Things are looking good and we are very excited abut 1994.
All I ask of Governments is that they keep out of our way, and leave us with the economic freedom to explore and produce. I know that we will only hold these freedoms, as long as we have the courage to fight for them. Courage is like love; it must have hope for nourishment.
In closing, may I wish you, the young and the old, success.
May I wish you courage also to expand your own freedoms and responsibilities within your chosen professions. This can be done if we take seriously our responsibilities as free people, which means never conceding to politicians and bureaucrats the right to run our lives.
But always remember that no matter what may happen, changes bring forth opportunities; and no matter what politicians and Government officials may do to us, the secret of economic success is to be ready for opportunities when they come.