The ghosts of the past can be portents of the future. But when the ghosts are laid to rest and fade from our collective memory they can no longer guide our way.
There’s now plenty of blue sky visible from 33 Bligh Street through to 20 O’Connell Street in Sydney’s CBD. Kindersley House has been taken away in trucks and the hydraulic demolition equipment is performing its final act, breaking up the concrete foundations with the rat-tat-tat-tat-tat of a slow motion machine gun.
An electricity substation, topped by a new office tower, will replace the building that housed a restless and remarkable ghost of the past.
For those of us who were there at the end of 1969 it was a site where something extraordinary happened. At that time 20 O’Connell was home to the Sydney Stock Exchange, where the Poseidon share boom took place. Like all extraordinary events, Poseidon gave us a lesson in communication: the communication of frenzy.
The Vietnam War was sucking in resources and the world’s biggest nickel producer, Inco, was suffering production troubles. The price of nickel on the London Metal Exchange rose during 1969 from £2,000 a ton to peak in November at £7,000. In late September the share price of nickel explorer Poseidon suddenly started moving up from around 80c, reaching $1.85 by Friday 26 September. The next trading day, September 29,1969, Poseidon reported striking nickel at Windarra, Western Australia and its price jumped from $1.85 to $5.60. Three day’s later a more detailed announcement of a 3.56% nickel intersection sent the shares from $6.60 to $12.30. Next day the price hit $18.40. In November it surpassed $50 a share. During December, it zoomed past $100 and then $200.
The stock peaked at $280 in February 1970, having doubled eight times from its initial 80c level. Long-term charting specialist, Garry Abeshouse, who was a scrip clerk and starting to get interested in charting at the time, will tell you it is very rare for any share price to keep doubling a total of more than eight or nine times over its lifespan. For example, Apple doubled nine times from August 1985 to May 2015. Walt Disney peaked at $120 after doubling seven times from 74c in October 1980, eBay peaked six times, while Google has doubled only four times to date.
In those five months of the Poseidon boom – when the Sydney Opera House was nearing completion and when Christo’s wrap up of 2.5km of Sydney coastline created the world’s largest sculpture – the nickel boom became the prime topic of conversation. The term ‘blue sky’ had nothing to do with the glimpse of a pollution-free day between city buildings ….it referred to the unlimited potential of an ore body open at both ends and at depth. Poseidon’s value was incalculable.
Crowds of speculators filled the public viewing gallery overlooking the stock exchange floor. They swelled and jostled, cracking the gallery’s glass panels. People gave up work to play the market. Austrian ski instructor, Franz Pichler, after teaching in Perisher for the season, didn’t return to the Austrian ski fields that year but stayed here all summer to gainfully speculate on stocks from the visitors’ gallery. Astrologer, Rex Steele Merton, became a regular at the 3rd floor of 20 O’Connell Street. He tried to predict the next stock to go for a run according to its star sign, based on each company’s date of incorporation.
Office workers, taxi drivers, teachers and nurses took up share trading and eagerly sought the latest rumour on any dubious new stock that could become “the next Poseidon”. Payment for shares did not have to be made for a couple of weeks, so speculators bought with the prospect of making gains before the money was due, and then selling for a large profit, no money down. The stock exchange computer struggled to keep up with trading volumes and stockbrokers’ offices became chaotic.
Traders were not required to borrow or hold shares to short sell them, as they are today. So, as Poseidon’s price skyrocketed in the initial weeks, my editor at the Daily Mirror finance section became convinced it was over-bought and shorted the stock. After struggling to buy back in as Poseidon continued to rise, he spent the rest of the nickel boom trying to make up for his loss.
The share boom was an experience of reckless optimism, over-exuberance, and greed without thought of consequences. It demonstrated how the public mind can become fixated on something that has no substance, like a Papua New Guinea tribe inventing a cargo cult. For a communicator, looking back, it offers a memorable example of the communication of frenzy, similar to the reknowned tulipmania in 17th century Holland.
The summer of 1969-70 gave us lessons in how perceptions become ‘reality’, how frenzy is transmitted in a boom, and conversely, how fear might spread in a crisis, a major disaster or pandemic. The bell-shaped curve of the Poseidon share price boom rose and fell through word of mouth and telephone, through newspaper, radio and television reports. There was no personal computer, internet or mobile phone, so the boom was a forerunner of the frenzy now possible, turbo-charged by online connectivity and larger pools of people and money.
While the internet and online media of today may communicate frenzy or fear faster than in the days of Poseidon, evidence so far indicates each crisis or bubble still follows a predictable pattern of growth and denouement. It is unlikely, however, that new media will accelerate this process to enable the exuberance of a bubble, or the panic created by an unexpected crisis, to end any quicker than before.
No matter what communication channels are involved, the communication of frenzy spreads like fire from tree to tree. Unlike a bushfire that usually burns on a single front, however, frenzy spreads in all directions at once, generating exponential growth.
The process has much in common with the contagion of the crowd which Nobel Prize winner Elias Canetti analyses in his Nobel Prize-winning book Crowds & Power. “Few can resist the contagion of the crowd. It can arise wherever people are together and its spontaneity and suddenness are uncanny,” he says, explaining that in the crush and excitement of the crowd everyone feels equal. Hierarchy, inequality and differences disappear.
But a crowd disintegrates as soon as it stops growing. In the same way, the frenzy of a ‘bubble’ event ends swiftly once the rate of contagion starts to slow. It’s like the concertina phenomena on a tollway, where cars at the tail end of a line of traffic are brought to a stop when drivers at the front pass an accident and slow down.
Outrage and fear
The craft of public relations, which includes communication during a crisis, attempts to manage or modulate contagion – sometimes to reduce it, sometimes to encourage it.
When a pandemic, earthquake or any other risk threatens a populace, it is essential to encourage action to mobilise everyone to take the right precautions to remain safe. If people are only mildly concerned and apathetic, they need to be warned to “watch out!” and encouraged to act. If employees are ignoring safety regulations, a form of communication is required that has similarities with crowd contagion.
However, when the public is over-reacting or panicking about a risk that is relatively low, a different type of communication is required to say “calm down!” Here, the task is outrage management.
As US risk communication specialist Peter Sandman says, there are three different types of communication that can be used in managing risk:
- Precaution advocacy is alerting insufficiently concerned people to serious hazards. The goal is to increase people’s concern (yes, encourage their outrage and fear) to motivate them to take precautions.
- Outrage management is reassuring excessively concerned people about small hazards. The aim is to decrease people’s concern in order to reduce their impulse to take (or demand) precautions you consider unnecessary. The main thrust in outrage management is to identify and change the misbehaviors that are leading your stakeholders to overestimate the risk. It’s not about telling them where they’re wrong; it’s about correcting where you’re actions or communications are not working.
- Crisis communication is guiding appropriately concerned people through serious hazards. The key task is helping people bear the situation and act wisely in the face of overwhelming emotions.
These types of communication have very little in common. So the task of the communicator is to determine how great the hazard is, and how severe it might become. Then decide whether the level of concern or outrage is appropriate for the danger involved, too high, or not high enough.
In this process, it is possible to graph the technical seriousness of a risk (the hazard) against its emotional seriousness (outrage and fear).
It’s only then that you know whether you’ll need your precaution advocacy toolkit, your outrage management approach, or crisis communication skills to modify the negative contagions of apathy or denial, fear and anger, panic or dread.
Hope, fear and greed trump logic and reasoning
The Poseidon boom showed how contagion can run riot and completely swamp logical analysis and reasoning. Crowd frenzy flourishes on emotions of hope, fear or greed, not logic and reasoning. Dozens of worthless exploration companies suddenly became ‘celebrities’, urged on by the theatrics of Rene Rivkin yelling “Buy! Buy! Buy!” on the floor of the exchange as he took every seller out of the market of a chosen stock to push it higher.
It was close to the peak of the boom when the herd charged into Tasminex after the nickel hopeful’s chairman stated it “…could be as big as Poseidon!”
The road smash that followed the boom saw Australia’s largest broking firm, Patrick Partners, go to the wall, a stockbroker jump to his death in George Street, and our largest mining house, Mineral Securities (MinSec), collapse. In the wake of MinSec toppling, its liquidator, Jim Jamison, gave a former house painter, Alan Bond, the chance of a lifetime when Jamison agreed to Bond’s audacious time payment scheme for Australia’s leading iron ore miner, Robe River. The scheme enabled Bond to buy Robe, the jewel in MinSec’s crown, using Robe’s future dividends. Borrowing against that asset gave Bond the ability to dominate the next asset boom.
But all the ghosts of that era are now fading. At 20 O’Connell Street today the last concrete reminder of that frenzy of 47 years ago has disappeared …soon the time will be ripe again for a new generation to live through a new frenzy. Lithium? Space exploration?
Whatever it is, it won’t be obvious until well after the frenzy has already started.
Journalist Trevor Sykes, in a Reserve Bank of Australia 2003 publication ‘Asset Prices and Monetary Policy’, gives four key foundation blocks for any hysterical boom.
First, a long period of growing prosperity in which the investing classes enjoy a rising tide of disposable income – as Australia enjoyed in the 1960s ahead of the nickel boom. The deeper this prosperity spreads downward into society, the better the chance of a boom because disposable income is in the hands of people who are inexperienced at investing it.Second, the arrival of an exciting new commodity or industry, such as railways in the United States in the mid-19th century or Silicon Valley in the late 20th. The early investors in that industry should be showing substantial returns, thereby attracting more risk capital. Typically, there is a long groundswell in a commodity price before it goes wild.Third, within that commodity or industry there should be one or two star performers, such as Poseidon in the nickel boom or Microsoft in Silicon Valley.Fourth, a marketplace that is liquid and unregulated enough for prices to explode.
*Brian, a director of FCR, was stock exchange reporter for the Daily Mirror evening newspaper and based in the Sydney Stock Exchange press room during the Poseidon boom.