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Speaker 1: at Bloomberg dot com backslash lens. That's incredible. That's the
Speaker 1: sound of Sydney's Bondaie Beach on an average weekend. Bronze
Speaker 1: surfers men and women of all ages, races creeds, pounding
Speaker 1: to the waves or just walking into them, or just sunbathing.
Speaker 1: Heir is thick with the scent of coconut oil, hot dogs,
Speaker 1: paddle pops and being Why are we visiting one of
Speaker 1: Australia's most iconic tourist attractions and one that suffers from
Speaker 1: the most mispronunciation. Well, if you listen to Benchmark, you
Speaker 1: know it's about economics. A plathora of surfers, turns out
Speaker 1: is actually a pretty good leading indicator of economic growth.
Speaker 1: Welcome to Benchmark. I'm Daniel Moss, executive editor for Global
Speaker 1: Economics in New York. We're joined today by Bloomberg's Mike Heath,
Speaker 1: who returned home to Sydney to cover the economy in
Speaker 1: two thousand and seven after spending the better part of
Speaker 1: a decade in Moscow, of all places. Mike, before we
Speaker 1: dive into the economics of surfing, answer me this question,
Speaker 1: just how much did you miss Australia and the great
Speaker 1: leveler the beach scene? Sure? Dan, I mean it was
Speaker 1: initially irrelevant to me because Moscow, you can imagine, was
Speaker 1: so exciting and different, and I just jumped into it.
Speaker 1: But after five years I had to come back to
Speaker 1: Australia as my mom was having an operation, and I
Speaker 1: did spend some time at the beach then, and I
Speaker 1: think it put out a kernel of a thought in
Speaker 1: my mind. And when I returned to Moscow, the thought
Speaker 1: of the sand and the sun and the surf it
Speaker 1: developed into almost a longing. And then a year after
Speaker 1: my daughter was born, I decided that for all the
Speaker 1: history and culture, rush it off. But I just couldn't
Speaker 1: deny her a childhood in Australia, and exactly do you
Speaker 1: say the Australian beach the great leveler and none of
Speaker 1: us have ever looked back. So you how old is
Speaker 1: she now? And you're taking out a surf lessons every weekend?
Speaker 1: I know she's past lessons now. We had a couple
Speaker 1: in the Southern Hemisphere summer up in Byron Bay. But
Speaker 1: she's a very good gymnast, my daughter, and so she
Speaker 1: was standing almost immediately. She's got terrific balance. So now
Speaker 1: I'm just trying to teach her to better positioners off
Speaker 1: to catch a wave. So she's almost got the cart
Speaker 1: before the horse kind of thing. But she goes out
Speaker 1: by herself. We go down every weekend and she's this
Speaker 1: tiny little speck among big rollers. Two weeks ago she
Speaker 1: was caught in a rip and the last guard asked
Speaker 1: me if I wanted him to rescue her, and I
Speaker 1: held him back and she got out of herself, exhausted
Speaker 1: because I really wanted her to learn some respect for
Speaker 1: the power of the ocean. So I think, you know,
Speaker 1: for a child especially, it's it's something central to you,
Speaker 1: to your existence in Australia. So let's get into this
Speaker 1: economic study. You know, the Study of Breaks is the
Speaker 1: latest piece of research that functions as an unconventional but
Speaker 1: surprisingly accurate guide to growth. Others include online advertising, Google
Speaker 1: searches and even Aliy Barber sales. And now surfing has arrived.
Speaker 1: Well i'll let our our guest in London, Dr Sam
Speaker 1: Wills do the details, but just a brief overview of
Speaker 1: his research. It's incredibly logical when you think about it.
Speaker 1: Surfers are basically the explorers hunting the next grave way
Speaker 1: to conquer, and once they find their mecca, their ocean mecca,
Speaker 1: there's a pretty good chance that the area is going
Speaker 1: to appeal to a lot of other people too, and
Speaker 1: so the infrastructure tends to emerge. Byron Bay in Australia,
Speaker 1: as Sam mentioned in his research, is a terrific example
Speaker 1: of that. Um it's become enormous these days. So Sam,
Speaker 1: come on down, Oh guys think so, thanks very much
Speaker 1: for having me. Sam. What is your model if you
Speaker 1: could explain it, and how did you come by it?
Speaker 1: So the idea of that the paper is that we're
Speaker 1: interested in trying to figure out whether or not the
Speaker 1: natural environment really affects growth. So we know that some
Speaker 1: things are important. We know that having a river or
Speaker 1: having a port, having a mountain range, all these things
Speaker 1: affect the economy, But what about just living in a
Speaker 1: nice place. Obviously, this is you know, we think that
Speaker 1: it might be important, but it's it's really hard to
Speaker 1: get at. And the reason why it's typicult is, first
Speaker 1: of all, it's tough to measure how nice a place
Speaker 1: is to live. And the second is in is uh,
Speaker 1: it's really hard to sort of isolate that niceness rather
Speaker 1: than other channels. And so to get this question, a
Speaker 1: colleague of mine and I decided to use surf breaks.
Speaker 1: The reason for that is that these surf breaks are
Speaker 1: basically randomly distributed all over the world, and we can
Speaker 1: use that randomness to really isolate the effect of what
Speaker 1: a what a good surf break is on the economy.
Speaker 1: And so that's what we've done in the study. So
Speaker 1: the idea for the study actually came just after I
Speaker 1: finished my PhD. I was holed up in a cold,
Speaker 1: miserable library and Oxford for for for every a year,
Speaker 1: riding up the thesis. And when I finished, I thought
Speaker 1: I'd jump on a plane and go somewhere sunny. And
Speaker 1: really I was looking for somewhere out of the way
Speaker 1: where I could get a good time away and get
Speaker 1: a few ways, and I ended up down in Morocco,
Speaker 1: a little place called taggers It. But I arrived there
Speaker 1: and the place was absolutely overrun. There were surf shops everywhere,
Speaker 1: even even the mosque was selling you know, surf wax
Speaker 1: and uh you know, old wetsuits and that sort of
Speaker 1: thing from from out the front. So it got me thinking,
Speaker 1: you know, maybe there's something to this, this surfing story.
Speaker 1: And that's when we sort of turn to the data
Speaker 1: to see if in fact it holds true around the world.
Speaker 1: You've just mentioned Morocco. Now your research also encompasses Indonesia
Speaker 1: and South Africa, But these countries aren't going to win
Speaker 1: prizes for economic management. How do you reconcile your model
Speaker 1: with the decidedly spotty record of these countries. Yeah, that's
Speaker 1: exactly right, and we're not we know that. You know,
Speaker 1: surf breaks probably is not the veal and end all
Speaker 1: for growth. You know, at the end of the day,
Speaker 1: evil comes down to institutions, as we know. But within
Speaker 1: a country holding everything else equal, places with good surf
Speaker 1: breaks will tend to grow faster than places without and
Speaker 1: we've tested this in a few ways. One, we just
Speaker 1: looked at places with good ways versus places with bad waves,
Speaker 1: and we measured how much economic activity there was using satellites. Now,
Speaker 1: these satellites measure how much light there is at nighttime,
Speaker 1: and it turns out that's quite a good proxy for growth,
Speaker 1: and so by doing that, we're able to show that
Speaker 1: these places with good ways do tend to grow faster. Um.
Speaker 1: Some other fun stuff that we did was looking what
Speaker 1: happened during ALMNO years, when when when the waves in
Speaker 1: certain parts of the world actually get really good, and
Speaker 1: we found that the growth really exploded during those years
Speaker 1: in places with good waves. And then another piece of
Speaker 1: a fine little experiment we ran was what happens when
Speaker 1: a wave is discovered. So back in two thousand and eight,
Speaker 1: Surfer magazine ran a competition called the Google Earth Challenge,
Speaker 1: and basically the idea was, you know, a bunch of
Speaker 1: kids sitting behind their computers tracing through Google Earth trying
Speaker 1: to find a wave that had never been served before.
Speaker 1: And the winner was this fantastic wave in Namibia off
Speaker 1: the coast of the desert. And this way just went
Speaker 1: for you know, hundreds and hundreds and hundreds of meters
Speaker 1: basically perfection. And so we found that after this wave
Speaker 1: was discovered and after the global surfing community got wind
Speaker 1: of it, the light around this wave really exploded, which
Speaker 1: kind of adds more weight to our our hypothesis. And
Speaker 1: the satellites proved that, Yeah, exactly. And what's the name
Speaker 1: of this beach in Namibia? So it's a break called
Speaker 1: Scales in bayh And yes it's worth a Google because
Speaker 1: this thing is just mechanically perfect waves, just breaking one
Speaker 1: after another. It's absolutely beautiful for one and a half
Speaker 1: kilometers long as well, I think from from memory, Sam, Yeah,
Speaker 1: exactly right over you know one and a half kilometers long.
Speaker 1: People are sort of when they surf there by all
Speaker 1: reports there they're pulling off waves because they get too tired,
Speaker 1: which you know, um, Sam, tell us, tell us personally
Speaker 1: what you like about surfing and and what it has
Speaker 1: to do with the economy, because in the popular mind,
Speaker 1: economics is all about charts and statistics and acronyms like GDP. Yeah, well,
Speaker 1: I guess you know. Surfing. Surfing is good for this
Speaker 1: sort of study because it really holds like a lot
Speaker 1: of sway over people's imagination. Uh. You know once once
Speaker 1: you started surfing it, he puts you in very close
Speaker 1: contact with nature. It's very meditative in a sense, and
Speaker 1: it becomes addictive as well. And so for all these reasons,
Speaker 1: as we know, surfers are willing to go out of
Speaker 1: their way to find find ways. Not only that, obviously
Speaker 1: surfing waves are a bit of a limited resource, and
Speaker 1: so that that adds to the UM. I guess the
Speaker 1: exploration that goes on with surfers trying to find waves.
Speaker 1: So that's the sort of thing that we're picking up
Speaker 1: in the study UM. Sort of things like you know,
Speaker 1: people traveling fire and wide to find new breaks and
Speaker 1: then they find them. People willing to sort of settle
Speaker 1: down and and you know, work for less money than
Speaker 1: make it earn otherwise because they get the benefit of
Speaker 1: surfing these great waves. Sam, I understand a sovereign wealth
Speaker 1: fund has brought your argument talk to us about that. Yeah,
Speaker 1: this is this was remarkable actually so uh most of
Speaker 1: my research is actually on sovereign wealth funds and natural resources. Uh.
Speaker 1: And I was at a conference on something completely unrelated
Speaker 1: to this surfing stuff and found myself having a conversation
Speaker 1: with the head of the Moroccan Sovereign Wealth Fund, and
Speaker 1: when I mentioned this surfing paper, he just his eyes
Speaker 1: lit up immediately because they have just pumped quite a
Speaker 1: lot of money into tagger Suit, the very place where
Speaker 1: I had the idea for the paper. And the reason,
Speaker 1: of course is that, um, you know, for the past
Speaker 1: you know, twenty or thirty years, surfers have been rocking
Speaker 1: up to this amazing break in Morocco called Anchor Point
Speaker 1: to surf it. And you know, over time in a
Speaker 1: tourist infrastructure is popped up to to service these surfers,
Speaker 1: and now it's it's a bit of a spot on
Speaker 1: the on the tourist trail for people who aren't interested
Speaker 1: in surfing at all. And so the Morocan Sophomore Fund
Speaker 1: has decided to build a big resort, you know, with
Speaker 1: conference facilities and and and golf, a golf course and
Speaker 1: all this other sort of stuff to make make use
Speaker 1: to that which you know, I guess for the purists,
Speaker 1: they'd say that it's the place the town is losing
Speaker 1: something in the process. So if you worked for a
Speaker 1: hedge fund, you've been now on the hunt for the
Speaker 1: next tagger Zoot. Tagger Zoot is done. Now you need
Speaker 1: to find the next big, big thing, right or the
Speaker 1: next new thing. That's the idea. So so this sort
Speaker 1: of this turns out traditional model on its head. There. Yeah,
Speaker 1: it's not about our agriculture, mechanized farming, industrial revolution, et cetera.
Speaker 1: It's just about ways. Yeah, that's what all comes down to.
Speaker 1: And let's talk a bit about technology. You mentioned satellites,
Speaker 1: but you know, we're becoming increasingly aware of technologies were
Speaker 1: all in surfing, like battery powered wetsuits for example. How
Speaker 1: transformative is that. It's a good point. So obviously, you know, surfing,
Speaker 1: like all industries, is being affected by technological process progress.
Speaker 1: Um in, the manufacturer of surfboards is has gone from
Speaker 1: a cottage industry where everything was shaped by hand too,
Speaker 1: being sort of mass produced from uh, you know, centralized
Speaker 1: cad drawings and that sort of thing. So you know,
Speaker 1: surfing has certainly been affected by technological progress. On the
Speaker 1: topic of battery heated wetsuits, this was actually a technology
Speaker 1: that we studied, so we were interested in what happened
Speaker 1: when rip Curl released a battery heated wet suit back
Speaker 1: in two thousand and seven. And basically this just meant
Speaker 1: that surfers could surf in really cold water for longer
Speaker 1: and made it much more comfortable. So from our data set,
Speaker 1: we looked at all the waves that were above fifty
Speaker 1: five degrees latitudes, so these really cold water weaves, and
Speaker 1: we found it after the wet suit was inbedded in
Speaker 1: two thousand and seven, growth in these cold water places
Speaker 1: really really exploded relative to everywhere else. So it's interesting
Speaker 1: you see that this little technological innovation has had actually
Speaker 1: quite a big impact on the local economies of these places.
Speaker 1: What's the coldest place you've served? The coldest place? So
Speaker 1: it's actually in Cape Town in December, and I'll tell
Speaker 1: you what, The water is pretty cold, pretty cold down there.
Speaker 1: That's the middle of summer. It was the middle of summer,
Speaker 1: but my word, it was, yeah, it was pretty chilly.
Speaker 1: What you were saying about the patterns of the waves
Speaker 1: struck me as curious. We've read about hedge fund stars
Speaker 1: who have an education in classical music and jazz, I mean,
Speaker 1: have studied it formally, and what they say it gives
Speaker 1: them is a sense of rhythm and what's the next
Speaker 1: key to come next? Is there something like this going
Speaker 1: on with the waves. Yeah, I guess there could be
Speaker 1: something similar there. You know, as I mentioned, it's a
Speaker 1: it's a very meditative sport and I think you know,
Speaker 1: in a in a field like academic research, it's always
Speaker 1: helpful to have, you know, somewhere you can um, something
Speaker 1: you can resort to to clear your head and just
Speaker 1: mull over problems and sitting at the back the surf
Speaker 1: break is really helpful for that. MS interesting sama was
Speaker 1: there was a great program on TV here. You might
Speaker 1: have seen it, or you might have been away when
Speaker 1: it came out, but it was Tom Carroll in a
Speaker 1: big wave surfing made of his basically looking for new
Speaker 1: waves around Australia to surf, and they ended up going
Speaker 1: out to this place that was on a map, a reef,
Speaker 1: I think it was on a map, and it was
Speaker 1: four hours by boat. I think it was southwest of Perth.
Speaker 1: So they're out there in the middle of the ocean,
Speaker 1: just wondering what the heck they're doing and don't know
Speaker 1: where they're emergence these these ways which they get on
Speaker 1: via boats or whatever. I mean, it seems at some
Speaker 1: point every wave will be conquered or is that impossible? Well, no,
Speaker 1: you're exactly right, Like, I guess it's just a finite
Speaker 1: a number of waves out there. Uh, And so eventually,
Speaker 1: you know, especially with countries like Indonesia and Brazil developing,
Speaker 1: you know, these are countries with a big population and
Speaker 1: a lot of coastline. You think the population of surfers
Speaker 1: in the world is really going to explode in the future.
Speaker 1: And I guess that's interesting because people are now turning
Speaker 1: to two alternatives. So we know that Kelly Slater, there,
Speaker 1: um many time world champion of surfing is has brought
Speaker 1: out a new inland wavepool which might be a substitute
Speaker 1: for you know, the real deal. And also we know
Speaker 1: that coastal engineers are working hard on figuring out ways
Speaker 1: to to create waves in the ocean where where waves
Speaker 1: weren't there before, so you know, creating artificial uh rock
Speaker 1: reefs and that sort of thing off off the coast
Speaker 1: so that when the swells hit them, they make ways
Speaker 1: that a surfable, right, So just sunder my own point though,
Speaker 1: but presumably there'd be erosion and stuff, so a break
Speaker 1: could disappear or reappear or appear you know, out of
Speaker 1: nothing as well. Presumably. Yeah, definitely, Actually we found a
Speaker 1: couple of castions of that. So one famous case was
Speaker 1: a break in Spain called Wundaka, and this was a
Speaker 1: really famous break was on the Surfing World Tour at
Speaker 1: a river mouth and at one point they decided to
Speaker 1: dredge the river mouth because they thought it would be
Speaker 1: good for the local economy, you know, getting more fishing
Speaker 1: boats in and out. What actually turned out to have happened,
Speaker 1: as we found by by looking at the satellite data,
Speaker 1: was economic growth in that little village actually stalled and
Speaker 1: fell because they ignored the fact that this this surf
Speaker 1: break was bringing huge numbers of tourists to the town
Speaker 1: every and so yeah, it just goes to show that,
Speaker 1: you know, maybe all these these surfers you know, who
Speaker 1: come out to defend their waves when rock walls are
Speaker 1: built and ports ports a proposed, they might be onto
Speaker 1: something because protecting these waves can actually have a big
Speaker 1: impact on people's jobs and their livelihoods. Sam, where did
Speaker 1: you grow up in Australia where you're near the beach?
Speaker 1: The idea beautiful little part of the world called hawks Nest,
Speaker 1: a few hours north of Sydney. So I guess yeah,
Speaker 1: I've been mowing on the topic for a while. Now.
Speaker 1: Our head of podcasts, Alec McCabe, is through the glass
Speaker 1: window here in the studio in New York. He's just
Speaker 1: finished reading Barbarian Days. And the most important question is
Speaker 1: what is your secret spot? Knowing full well it may
Speaker 1: no longer be secret after your answer, Well, I'll tell
Speaker 1: you what. The great thing about this this study is
Speaker 1: we've got a database about five thousand ways from all
Speaker 1: over the world, and we've also got a bit of
Speaker 1: an idea about how crowded each of those waves up.
Speaker 1: So yeah, sitting in our computer is is some pretty
Speaker 1: useful information and in a sense a bit of a
Speaker 1: um a checklist for places I'd like to visit in
Speaker 1: the future. But I guess it would be cheating if
Speaker 1: I gave it away on the radio today. So if
Speaker 1: your home is burgled, don't go looking for Alec. Yeah, Sam,
Speaker 1: it's been a real treat to have you. Thank you
Speaker 1: so much, Thanks very much, so very much for having
Speaker 1: you guys. So Dan talking with Sam after that, do
Speaker 1: you miss your your old home in Bondai? And where
Speaker 1: were you in Bondai? And did you sir? Okay, So
Speaker 1: I did not live on the beach. I lived up
Speaker 1: closer towards the Bondai Junction train station, but there's no
Speaker 1: question it was Bonda I, bond I post code. I
Speaker 1: lived there for six months. In prior to that, I
Speaker 1: was living in Wallara, which is just you know, a hop,
Speaker 1: skip and a jump from there, before moving to quiet,
Speaker 1: a lump of Malaysia, and I've ultimately ended up here
Speaker 1: in New York. I am still an Australian citizen, though
Speaker 1: I am a naturalized American as well. And Mike, just
Speaker 1: this conversation, it did make me pine. It made it
Speaker 1: does that to you, doesn't it. It really really does.
Speaker 1: When I came back to Australia from Russia, I was
Speaker 1: determined to make my wife like Australia and I found
Speaker 1: this great little flat at the bottom. It is like
Speaker 1: a second story on a person's masonette. And it was
Speaker 1: just on del View Avenue, which just drops down to Tamarama.
Speaker 1: And when my wife got there, she was like, oh
Speaker 1: my goodness, it's like living at a resort. Now, Parking
Speaker 1: obviously is not like a resort because it's just jam
Speaker 1: packed in the eastern subives of Sydney. But what a
Speaker 1: little spot for six or six month introduction to Sydney,
Speaker 1: what a spot to be. So I did not actually
Speaker 1: surf on a board. Um. I grew up in Canberra,
Speaker 1: which for listeners unfamiliar with the geography of Australia, it's
Speaker 1: about three or four hours inland from the coast, depending
Speaker 1: on how you define it. I did body surf at
Speaker 1: Bondi when I lived there, and you know, as Peter
Speaker 1: Garrett has said, body surfing is one of the great
Speaker 1: communal things you can do with nature. It is. It
Speaker 1: is indeed, I guess the only thing that you'd say
Speaker 1: about surfing is you just go that bit faster, but
Speaker 1: it is. I think, I think there is really something
Speaker 1: something where you do feel at one with the with
Speaker 1: the environment when you are on a on a wave
Speaker 1: and when you feel that power and the speed that
Speaker 1: sends you on and you get that from body surfing
Speaker 1: as well. So it's a terrific, terrific sport recommended to everybody.
Speaker 1: My son lived in North Carolina for a couple of
Speaker 1: years and if folks are familiar with the shoreline on
Speaker 1: the East coast of the United States, there's some pretty
Speaker 1: great beaches down there, Writesville Beach being one, and ultimately
Speaker 1: he was spending too much time surfing. I had to
Speaker 1: do something about it. Mike, you'll have to join this
Speaker 1: podcast again. I'd love to. I'd love to. It's been
Speaker 1: a real pleasure to be on here. Thank you very
Speaker 1: much for having me. Benchmark will be back next week
Speaker 1: and until then, you can find us on the Bloomberg terminal,
Speaker 1: Bloomberg dot com, our Bloomberg app, as well as iTunes,
Speaker 1: pocket Cast, and Stitcher. While you're there, take a minute
Speaker 1: to rate and review the show so more listeners can
Speaker 1: find us and let us know what you thought of
Speaker 1: the show. You can follow me on Twitter at Moss Underscore, Echo,
Speaker 1: our guest at at Sam e Wills One Word and
Speaker 1: Mike at m a Heat One. Benchmark is produced by
Speaker 1: Sarah Patterson. The head of Bloomberg Podcast is Alec McCabe.
Speaker 1: That's the avid reader I referred to. Thanks for listening,
Speaker 1: See you next time. Get Bat and I Under the
Speaker 1: Boy