Dear How Do I: Business?
I run a small publishing and distribution business and we've run into a small problem.
Our main business is in educational texts and textbooks for primary and secondary school students, but the recent doubt over Gonski has meant a lot of our client schools have decided not to renew contracts.
Should we wait for new policy or is it time to bail from the market?
There are a couple of micro-economic principles that apply here.
The first task is to test if the market you're working is stable enough to stay in. Take the number of contracts you usually have and then divide it by the number of times Joe Hockey has mentioned the Labor Party this month.
If the resulting number is greater than one, you're in trouble and so is the economy.
Secondly, businesses within the education sector face a different long-run production curve to most industries, mainly due to what economists call Ignatius' Law.
Basically, for any given level of production, Chris Pyne's propensity to lie about education policy remains constant at "almost certain".
The unfortunate upshot of all this is that the education sector, especially for private suppliers, is as stable as a happy-clapper speaking tongues during a royal commission.
My advice for now is to exit the market, buy Delloite and KPMG stocks and get rich off the sale of public-private partnership failures that'll be common over the next 10 years.
If you've got cash to spend after that, a drug addiction might make the next generation of school-leavers somewhat more bearable.
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