• Auckland, Guangzhou, and Los Angeles have strong and long-standing sister city relationships.
• Auckland Los Angeles share similar challenges, particularly in transportation, the economy, international trade and innovation. Eric Garcetti believes these challenges come from our cities being “victims of our own success”.
• Over the next decade, autonomous vehicles are expected to revolutionise transport. People won’t need to own their own cars, and cities won’t need the carparking infrastructure they have today.

“We have a lot to learn from each other, and we decided to formalise that relationship to improve the economy and the quality of life in each of the three cities.” – Eric Garcetti

While in Auckland, Los Angeles Mayor Eric Garcetti spoke of the strong and long standing relationship between the cities in the Tripartite Economic Alliance, the similar challenges Auckland and Los Angeles are facing, and the opportunities that can come from our longstanding relationship as sister-cities.

Los Angeles has been a sister city with Auckland for 45 years, and with Guangzhou for 35 years. “Two years ago in Guangzhou we realised there was so much we could share with each other, especially in transportation, the economy, international trade and innovation,” Garcetti said.

He believes that local governments are where the rubber hits the road and innovation takes place. “We have a lot to learn from each other, and we decided to formalise that relationship to improve the economy and the quality of life in each of the three cities.”

 

Although Garcetti acknowledged Auckland and Los Angeles share similar challenges, he believes they come from our cities being victims of our own success. “Both cities are learning from mistakes of the past, and undergoing massive transformation in infrastructure, housing, and transportation,” he said.

“Rents are going up, traffic is increasing. But on the other hand, we have a booming economy. People love Los Angeles – it is the northern capital of Latin America, western capital of the United States, eastern capital of the Pacific. In so many ways, people want to be there because it is such a creative place. We just have to solve what that does to people, so they can have a decent place to live, and not be stuck in traffic.”

Both Los Angeles and Auckland’s current housing affordability problem is driven by a lack of supply. Garcetti has been heavily criticised for removing historic buildings in order to build apartments, however he believes that city planning requires a careful balance of urbanisation and preservation.

Neighbourhoods can be preserved, as long as we put intensification around areas we have put public transportation in place. “It’s a supply and demand issue. You have to put buildings where you’re investing in transit, and in your downtowns,” Garcetti said.

Even more so than Auckland, Los Angeles is defined – and criticised – by its roads, and its transportation problems. Both cities removed their tram and streetcar networks in the 1950s and invested heavily in roading infrastructure.

“We want to have cars and we love cars, and we need to improve our roads, but there’s no space to build new freeways. What we have to do is lay down rail that allows people to get around,” said Garcetti.

Los Angeles residents are strongly supportive of increasing public transport. The city requires two-thirds of the population to vote in favour of tax increase, and yet eight years ago the city agreed to tax themselves a quarter-cent on every dollar of sales to initiate a US$35 billion construction programme.

“We literally have five lines underway, connecting the airport, and you will now be able to go from the skyline to the shoreline – Downtown to Santa Monica, for the first time in sixty years, just like our grandparents used to do,” said Garcetti.

Over the next decade, Garcetti believes that autonomous vehicles will revolutionise transport. Although Los Angeles has excellent roads, in Downtown Los Angeles, 81 per cent of space is taken up by car parking spaces. With autonomous vehicles, people won’t need to own their own cars, and won’t need carparking infrastructure.

“96 per cent of the time, cars are not driven – we own too many of them,” Garcetti said.  “Even at peak traffic – which is only 5 per cent of the day – 10 per cent of the roads have cars on them, 90 per cent don’t. It’s a spacing problem, and we’re right on that brink.

Infrastructure, housing, and transportation are challenges that Garcetti believes our cities can work with each other to share ideas and learn. The formal relationship that our sister city relationship and the Tripartite Economic Alliance provides means Los Angeles, Auckland – and Guangzhou – can innovate, grow, and solve these challenges, together.

•  The creation of networks of people is an important driver for economic development and can help to fully unlock creativity.
• It can be argued that China is millennia ahead of the rest of the world in terms of understanding the role of networks, and cultivating them.

“The economic driver of the future isn’t a factory or a piece of technology or software. It’s actually networks.” – Sunny Bates

 Sunny Bates is CEO of Sunny Bates Associates and a director of Kickstarter and Creative Capital, an advisory board member of MIT Media Lab, and a Brain Trust member of TED Conferences. She advises big corporations including GE and Proctor & Gamble.

Bates is also an expert in human networks, and although she spoke at the Tripartite Economic Summit about how she spends her life with a fear of missing out, it seems she does everything but. Bates joked – though only half-heartedly – that her keynote address was organised thanks to a chance meeting in a hot tub on a boat with a New Zealand executive. Opportunities like these don’t seem all that uncommon in Bates’ life.

 

Networks redefined

Bates insisted the economic driver of the future won’t come from factories, technology, or even software. But it will instead come from networks – networks of people.

“The most important thing anyone can do to drive economic development and fully unlock creativity is to create networks of people,” she said.

Bates pointed out that art and culture are critical economic drivers. The cities and regions that understand this are consciously creating conditions to attract and retain people and support their networks. They will be the winners this century.

The Tripartite Alliance was highlighted throughout the Summit as an example of where cultural cross-pollination is occurring, with tangible benefits resulting. “There is a beautiful cultural exchange going on,” said Melanie Higgins, US Consul-General in Auckland. “Culture transcends the boundaries and the Pacific connects us.”

 

What are networks?

Guanxi is a Chinese word originating from the Chinese social philosophy of Confucianism, stressing the importance of mutual obligations, reciprocity, and trust with others in order to maintain social and economic order. It describes the importance of connections and networks that are formed between individuals – and the way that people find each other, and the way in which capital and ideas move.

Bates argues that China is millennia ahead of the rest of the world in understanding the role of networks, and cultivating them.

Most people think of a network as being something physical. But instead, Bates’ thinks of Rome.

In contrast to other big cities – particularly London’s Thames and the Seine in Paris – Rome has been strangely disconnected from the Tiber river. The river, although running through the heart of the city, has been neglected over the years, and people don’t use it.

For the revitalisation of the river, Rome didn’t build a stadium or a factory. Instead, they commissioned a massive art project. William Kentridge created a 550 metre frieze – Triumphs and Laments – running along one side of the embankment between Ponte Sisto and Ponte Mazzini. Rome’s largest piece of public art since Michelangelo’s Sistine Chapel wasn’t painted on the walls. Instead, large, figurative stencils were placed on the river’s embankment and the wall then power-washed around them – a process referred to in the industry as ‘reverse graffiti’.

This revitalisation of the heart of the city, although only opening last month, has already made the waterfront a place that people want to visit. Rome has become the go-to European destination this summer.

How did this happen?

We often talk about things ‘taking a village.’ But the modern day equivalent is that it takes a network – and often a global one.  Allowing arts and culture to flourish and become an economic driver requires funding, public policy, and infrastructure. You need support not only from government, but from the public.

The project in Rome was created by a South African artist, commissioned by a Roman arts organisation, with funding through the US crowdsourcing website Kickstarter. The project raised over US$95,000 – easily surpassing the goal of US$80,000. Most backers for the project were based in America and will likely never see the artwork. But it doesn’t matter – because as Bates points out, networks know no borders. That is their power.

What is culture in an economic context?

Today, networks are immaterial. Moving beyond goods and services, networks still produce values and products – they just look different. Experiences, intangibles – a conference – these are all cultural products. They have intellectual property, a location where these experiences happen, and a process that leads up to them.

The recent hoverboard craze is another example of a network in action, Bates explained. They were born out of social network magnification and are now a global phenomenon. China’s Shenzhen has become the world capital of meme manufacturing – 600 manufacturers started producing hoverboards in the first six months of 2015. This idea of meme manufacturing typically starts in the west – an idea spreads through an elaborate social network. Tweets, likes on Facebook, and photographs posted onto Instagram have the power to shape the lives and economies of people and places on the other side of the world.

The economic power of culture and networks was also evident in a panel discussion on the ‘influencer economy’. “A lot of people underestimate the power of culture and how that actually impacts people’s buying decisions,” says Angelo Pullen, founder of 3BlackDot. Increasingly, YouTubers are “driving forces in culture for young men and women around the world.”

3BlackDot is essentially a network itself; the company has a number of YouTube stars under its umbrella, which Pullen describes as “a network of YouTube influencers.” Between them, these 22 influencers have some 70 million followers and receive around 700 million views each month.

Other examples of culture impacting economics that Bates spoke of included:

• The Gates in New York were a group of gates comprising a site-specific work of art by Bulgarian artist Christo Yavacheff and French artist Jeanne-Claude. They installed over 7,500 vinyl gates along pathways in Central Park. Although this was initially rejected in the 1980s, it ultimately attracted many people, and helped to boost the arts scene in New York.
• After a struggle spanning the seventies, eighties and nineties in Berlin, the wrapped Reichstag was completed in June 1995. For two weeks the building, the former centre of the German Empire, was shrouded in silvery polypropylene – highlighting the features and proportions of the imposing building. It helped shift Berlin into a celebratory mood with crowds gathering day and night and marking the beginning of the city’s twenty-year ascent to become the cultural mecca of Europe.
• The 798 Art zone – or the Dashanzi Art District in Beijing – is a 50-year-old decommissioned military factory with a unique architectural style. It has been transformed into a thriving community for artists. The building brings together an eclectic mix of people that would otherwise not have an outlet.
• The Lord of the Rings is a great New Zealand example of culture driving economics. The films helped to grow tourism by 40 per cent from 2000 to 2006. Six per cent of international visitors cited the films as their primary reason to visit New Zealand. The films continue to boost the New Zealand economy, estimated to be worth NZD$33 million a year.
• The film and television industry in Los Angeles accounts for a significant amount of the US GDP, and is a critical mass for cultural migration. Furthermore, business in Hollywood tends to be done over drinks and a meal – which was fuelled a great culinary scene in the city.

Bates concluded her talk with an inspirational message that set the scene for day two of the Tripartite Summit.

“Networks are the structural basis for globalisation and for modernisation,” she said. “Networks know no boundaries, and cultural networks are powerful. They should be consciously created for the benefit of everyone. They can’t be violated, abandoned or ignored. Networks have power that can’t be explored without consequences.”

• The food industry is undergoing massive change. Farming systems and sources of food are being transformed around the world, new retail models are emerging in the food sector, and consumer demand is rapidly changing.
• Reinvention of New Zealand’s food industry is critical to the country returning to the forefront of exporting and developing food and agribusiness products.
• The global challenges in the food industry are so urgent that it is no longer alright to focus on research for research sake – there must be a connection between research and the adoption routines of the marketplace.

“It is a fast moving world and no longer alright to focus on research for research sake. The problems we face are so urgent that there must be a continuing connection between research and the adoption routines of the marketplace.” – Rohit Shukla

The challenge faced by New Zealand

Since the 1970s, New Zealand’s economic performance has drifted, and we are no longer at the forefront of exporting and developing food and agribusiness products. Over the last fifteen years, New Zealand has doubled exports in food and agribusiness – but that is largely down to increasing volumes of commodity products, which are currently more volatile than ever.

“What got us here will not get us there – reinvention is critical,” said Buckley, Executive Chairman of KPMG New Zealand. The New Zealand Government has set a target to double our exports in food and agribusiness through until 2025. “If we are going to succeed with that goal, the help of America and China is essential to make this happen,” he said.

New Zealand produces enough food to feed 20 million people – around five times its population. A real challenge for us is that we must not rush off to feed the first 20 million people we come across, said Buckley. “For New Zealand to get the best returns, we need to look at the top 800,000 affluent customers, and feed just a portion of their diet.”

The food industry is undergoing massive change. Farming systems and sources of food are being transformed around the world, new retail models are emerging in the food sector, and consumer demand is rapidly changing. New Zealand needs to be aware of this evolution in order to leverage it.

 

Changes in farming

• The use of drones for precision agriculture has made crop management explode around the world. Drones can provide live data, with a range of sensors, to provide in-depth information.
• The Climate Corporation was founded in 2006 by two former Google executives. It examines weather data to farmers, who can then gain insurance and lock in profits in the case of droughts and adverse weather conditions. Monsanto acquired this business in 2013 for US$930 million.
• Farmers are using data for ‘smart farming’. Sensors are being integrated into irrigation systems that can provide ground water information.

Reinventing our food source

• Wayback Burgers in the United States offered customers the chance to increase their protein intake by offering the Oral Mud Pie Cricket Protein milkshake, with 24 grams of protein – or 96 crickets.
• Impossible Foods is producing plant matter that is made to look like beef, taste like beef, bleed like beef – but is not beef. The Impossible Burger is promoted as having the look, feel, smell, sizzle and taste of a great burger, but made from plants.
• Fearlife provides milk products with superior nutrition, less sugar, more protein and calcium, and no lactose. It is owned 50 per cent by Coca-Cola.
• SmartFish source their fish from Mexico, and deliver to top restaurants in California and Texas. The company places emphasis on quality, efficiency and responsibility, with a focus on sustainability and social, economic, and environmental returns.

Emergence of new retail models

• Food wastage is a big issue worldwide. Wefood is a charity-based organisation operating in Denmark, and has opened the first ever food surplus food market. Although it is 30 – 50 per cent cheaper than normal supermarkets, it is not only aimed at low-income shoppers. A large number of shoppers are those who are concerned about the sheer amount of food waste. The charity hopes to reduce 700,000 tonnes of food that Denmark wastes each year.
• MyFoodBag is a homegrown example from New Zealand, which was formed three years ago. Weekly dinners are ordered ahead of time, delivered on Sunday with innovative, healthy recipes. This business model avoids typical supermarket supply chains, and has already grown from $0 to $100 million in turnover.
• Eat My Lunch is a great success in New Zealand. People order a healthy lunch for $12, and at the same time Eat My Lunch provide a free lunch to an underprivileged child who would have otherwise missed out.

Consumer demand

• There is increasing consumer awareness, and demand for traceability and transparency of food and the way it is produced and distributed, and yet the frequency of food contamination is increasing. This is just as important for large economies as it is for those rapidly developing countries.
• Consumers are becoming more aware of what they are eating and there is a growing trend for organic products. While the payout for dairy farmers is less than $4 per kilogram milk solids, Fonterra – New Zealand’s largest milk cooperative – has just offered $9.20 per kilogram of milk solids if farmers can provide organic milk.
• Sugar levels in food is a big issue dominating headlines at the moment. As a result, people are changing their diets, and some economies are imposing sugar taxes. Nutritional facts is a trend nowadays. Consumers are spending considerable time looking at labels and nutrition levels before buying a product.
• Driscoll’s is a very large producer of berries in the United States. Their supply chain innovation strategy is built around delighting their consumers. As soon as berries are packaged, a unique barcode is attached to each box that can be used by the consumer through a smartphone app to report on their level of delight with the berries. Through this, Driscoll’s can track the field the berries were grown in, and the time it took for the berries to go through every step of the supply chain before reaching the consumer. Driscoll’s has begun rewarding individual growers that produce the best berries and create delight for their customers. This simple connection with traceability of foods has reduced input costs by significant amounts, and an increased level of ‘delight’ for their consumers.

New Zealand must protect its natural resources, Buckley told the audience. He used Ireland’s ‘Origin Green’ as a model. Origin Green is a sustainability programme that operates on a national scale, and unites government, the private sector, and food producers through the Irish Food Board. It sets targets for farmers and food producers to meet on sustainability, resulting in a positive impact on the environment, local communities, and Ireland’s natural resources.

 

Rohit Shukla, chief executive of the Larta Institute in Los Angeles agreed with Buckley, and believes New Zealand could – and should – be a truly global player in the high-value nutrition sector.

“The great thing about New Zealand is that you can collaborate on a research basis,” he said. “New Zealand is a small country which allows for shared facilities and research. This is unlike in the US, where universities and research institutions tend to be very proprietary about what they develop, which stifles collaboration.”

Shukla threw down a challenge at the Summit. He urged the audience to consider what we could do as three world-class cities, and suggested the creation of a tripartite working group that would be dedicated to food safety, reliability, and innovation in high-value foods. “I imagine this would involve a combined research effort across the three cities, and must include the collaboration of universities, public health bodies, and regulatory agencies,” said Shukla.

“By creating a grand challenge for collaboration, the tripartite alliance could create high-value foods that are good for our economies, and good for our planet,” he said.

Shukla emphasised how important it is that the applications of research are understood and framed in the context of what is happening in the world.

“It is a fast moving world and no longer alright to focus on research for research sake,” he said. “The problems we face are so urgent that there must be a continuing connection between research and the adoption routines of the marketplace”.

• Several decades ago, there was a common perception that all Māori were factory workers, truck drivers, or cleaners – Maori success in business was only ever seen as the exception.
• Māori are quickly becoming significant economic powerhouses, owning an estimated NZ$40 billion of assets in New Zealand.
• Māori are spiritual people, and their motivation in business reflects their world view: that long-term sustainability is more important than profit.

“Māori are a people of the land, and everything we do relates to the environment around us. Though that said, we also have a significant interest in digital, IT, education, and tourism.” – Te Ururoa Flavell

“It is only several decades since there was a common perception that all Māori are factory workers, labourers, truck drivers, or cleaners,” said Paul Majurey, senior law partner and of Ngati Maru/Marutuahu descent at the Tripartite Economic Summit. “Success in Māori business was only ever seen as an exception.”

But for many centuries, Majurey explained, Māori flourished in New Zealand. In the 1850s, Māori still owned the majority of land in New Zealand. All of this changed in the 1860’s, and yet they continue to have the skills and the integrity to flourish in the industrial age.

Despite adversity, Māori are again becoming significant economic powerhouses. Majurey predicts that in another decade, Māori will be one of the cornerstones of the New Zealand economy.

Auckland Māori own more than $23 billion of assets, contributing more than NZ$4 billion to Auckland’s GDP. New Zealand Māori assets account for an estimated NZ$40 billion, including 40% of New Zealand’s export forest land, 40% of our fishing quota, 10% of kiwifruit, and a high percentage of land production. “As further settlements occur, the value of the combined Iwi asset portfolio is expected to grow significantly,” said Majurey.

Te Ururoa Flavell, co-leader of New Zealand’s Māori Party, spoke at the Summit about the legend of Māui fishing up the North Island with the jawbone of his grandmother.

“The fish that was pulled out of the ocean was a traveler and an entrepreneur. He may have made it to China and Los Angeles before his final destination of Auckland,” he said.

Flavell explained that to Māori, economic development translates to jobs, enterprise, land development, and infrastructure in cities and towns. While private enterprise is required to answer to shareholders, Māori business has to answer to Iwi and they must balance economic returns with social and environmental concerns, to ensure it remains in place for future generations.

Māori are not new to international markets, innovation, and enterprise, Flavell told attendees. “Māori can trace their DNA back to China over 6,000 years ago. This demonstrates that Māori people have historically been resourceful, resilient, and adaptable.”

“On the other side of the Pacific, some of our ancestors spread to the Americas. We have strong links to groups in North America, and Māori people are now seeking partners to unlock land productivity in that market,” he said.

Māori businesses have a strong desire to move up the value chain, participate in international markets, and use the tradition of storytelling to carve out a point of difference to global markets. The future will look different for Māori business as they differentiate into new sectors.

“Māori are a people of the land, and everything we do relates to the environment around us,” said Flavell. “Though that said, we also have a significant interest in digital, IT, education, and tourism.”

“Māori will never lose interest in the primary sector, but they are looking to diversity and form partnerships with government, private companies, and foreign investors all over the world in order to grow their asset base in New Zealand.” -Paul Majurey

Majurey agreed with Flavell – “Māori will never lose interest in the primary sector, but they are looking to diversity and form partnerships with government, private companies, and foreign investors all over the world in order to grow their asset base in New Zealand.”

Both Flavell and Majurey emphasised how important relationships are. For Māori, relationships are about mana, and of significant importance. Māori are spiritual people, and agreements are based on trust. Their motivation in business reflects their world view: that long-term sustainability is more important than profit.

“Māori want to hear your heart, not just slick words,” Flavell said. “If there is no connection to your heart, then there can be no deal – because it will be doomed from the start.”

• The Chinese government is heavily promoting entrepreneurship and there is a natural drive towards innovation as the country’s economy moves into a new phase.
• China is quickly becoming known for high-quality innovation, and the creation of new ideas and technology out of what already exists.
• China’s history as a manufacturer of the world’s goods has allowed the country to expand on its history as a producer of low quality products made with cheap labour towards more specialised high-value products.

“It is easier to find skilled talent in China than anywhere else in the world. The quality of software engineers is equal to anywhere else, but the cost is one-third the price in China, compared to hiring staff in Silicon Valley.” – Derrick Xiong

Derrick Xiong from Ehang Inc. began his presentation at the Tripartite Economic Summit with an old Chinese saying – “timing, location, and people”.

Ehang Inc. launched the world’s first autonomous air vehicle earlier this year. The mega-drone can carry an individual for about 30 kilometres. Recently Ehang Inc. made an announcement with US company United Therapeutic – a public company with a US$5 billion valuation. The two companies are working together to develop a new system that will transport human organs for transplant patients.

Xiong referred back to the Chinese saying. “It is lucky,” he said, “that China has managed to tie all these things together.” Seemingly by sheer luck, China has got the mix of timing, location, and people right, which has allowed companies like Ehang Inc. to be part of the rapidly growing drone industry in China – the “new era of made in China”.

Timing

There is a national drive towards innovation in China and the Chinese government is heavily promoting entrepreneurship as the country’s economy moves into a new phase.

There are many startups emerging in China every day, and plenty of capital flowing around the China market to fund them. “It is very common now to see graduates exploring innovation as an opportunity,” said Xiong. “The most exciting part is that it’s no longer the best option for graduates to go and work in a big cooperation. Choosing an alternative route and working in a start-up or founding a company has become a great opportunity.”

Xiong admitted that when people think of ‘made in China’, they tend to think of low-quality products made with cheap labour. However, things are changing rapidly. The history of ‘made in China’ has given China a strong base to grow from, and allowed them to expand on their existing manufacturing facilities and skills.

Location

Xiong estimates that the amount of time his company spent prototyping their drones would be only one-third of the time spent by other drone companies based outside China.

“This is China’s big advantage,” he said. Companies in France and the United States are announcing they will shut down their consumer drone business, which Xiong attributes to how hard it has become to catch up and compete with the rapid pace of development in China.

People

Over the past decade, mobile internet has changed the way people live, work, connect, and trade. This hasn’t been ignored by China, and along with the many apps being created and launched from there, a huge pool and demand for talented software creators has been established.

Although hardware companies like Ehang Inc. focus on hardware, they also need to utilise the skills of software engineers. “It is easier to find skilled talent in China than anywhere else in the world,” said Xiong. “The quality of software engineers is equal to anywhere else, but the cost is one-third the price in China, compared to hiring staff in Silicon Valley.”

In the end, Xiong said, there will be a new definition for ‘made in China’. It will be about high-quality innovation, and the creation of new ideas and technology out of what already exists. “China’s combination of timing, location, and people will transform the way we all live in the world.”