Ok, let’s take a little stroll into Victoria, but before I do, I want to talk about a racehorse.
Breeding a racehorse is an expensive business. So is racing one. Once, many years ago, I had the wonderful experience of being involved in a syndicate of people who bred a racehorse. We had it broken in by a country trainer who had a showjumping background so – compared to some in the racing industry – he was very good with horses. The trainer told us that she was a lovely filly. Nice natured. She was “a doll”. He advised us to sell her to someone interesting in equestrian sports because she was far too slow to ever win a race. “I could keep taking your money,” he said, “and get her to the track, but you’re better off cutting your losses!”
I passed the message on to the syndicate. Many pulled out, but a few decided that it was better to give her another chance with a different trainer. After all, they argued, racing was full of stories where champions were dismissed too early.
And so, eventually, this filly had her first start. She managed to keep pace with the field until they sprinted about four hundred metres from home. I have never seen a horse get so far behind so quickly.
Yes, I was glad that I understood the notion of “sunk costs” and that I wasn’t one of the people who’d spent the hundreds of dollars getting her to that race start.
But of course, it’s also true that it had cost me far more money than I should have spent to get me to the point of pulling out. When I pulled out, I had nothing to show for it. And, as someone said to me at the time, “You’ve spent all that money and now you’re pulling out without even getting her to the races to find out if she’s any good.”
Yes, we don’t like the idea of thinking we’ve just wasted our money. It’s why people hang on to shares that they bought because some guy in the pub told them that someone had told them something, and that sometime in the not too distant future, they’d be worth a fortune. It’s also why people keep playing the same poker machine: “It must be due to payout now; it has so much of my money in there, there has to be a jackpot soon!”
Which brings me to the recent decision by the Victorian Labor Government not to proceed with the East-West Link.
For some strange reason, people seem to think that it was worth spending three billion dollars to link a freeway in the east with Flemington Racecourse. (Ok, it wasn’t directly with Flemington Racecourse, but I’m trying to keep the racing theme going here, and it was walking distance.)
The business case wasn’t released. But hey, let’s not worry about that. They told us that it was fine and releasing it would just enable people to adjust their bids and undercut the prefered bidder. At least, that seemed to be the rationale. But I’m not good at managing money. I once invested in a broodmare and – in the end – I had nothing to show for it. I’m not like those Liberals. If there’s one thing the Liberals are good at doing it’s managing money, and they often manage to move it from one place to another quite successfully, while arguing that it’s better off in the hands of someone they trust than in the hands of the public service who’ll just waste it on things like benefits to the undeserving poor. So when they say, Trust Us, you know that you want to.
And they told us that they were the only ones who could ease the congestion on Punt Road. Which runs North-South. And it seems to me that this was like arguing that I’m going to ease the congestion at Sydney Airport by building another airport in Canberra. But what would I know?
Then Labor were elected, and it emerged that the Liberal Government, in the final week before entering caretaker mode, not only signed the contract, but gave the consortium a written guarantee that they’d be paid well over a billion dollars, even if the road wasn’t built. Labor managed to negotiate a deal for considerably less than the billion dollars.
So now we have letters to the editor complaining that Labor have spent all this money, and they’re not even going to build the road. What a waste! Not many, of course, complain that the Liberals rushed to sign such a one-sided contract. The Liberals are good with money. They’d have built us a road that would have cut several minutes off a journey that sometimes in peak hour might take as long as twenty minutes.
Notwithstanding the fact that we’d be much further in debt if we’d actually built the road, I can’t help but wonder, would any of these people be interested in a plan to use the DNA of my failed racehorse to see if we could perhaps clone her and see if she could win a race. I can offer them an excellent deal. $10 now, and every week until they decide that there’s no way that they’ll ever get their money back, and pull out! But I doubt that most of them would ever want to pull out.
After all, it’d be shame to waste all that money and not have anything to show for it!
