How Surfers Ride the Wave to the Next Economic Boom

at Bloomberg dot com backslash lens. That's incredible. That's the sound of Sydney's Bondaie Beach on an average weekend. Bronze surfers men and women of all ages, races creeds, pounding to the waves or just walking into them, or just sunbathing. Heir is thick with the scent of coconut oil, hot dogs, paddle pops and being Why are we visiting one of Australia's most iconic tourist attractions and one that suffers from the most mispronunciation. Well, if you listen to Benchmark, you

know it's about economics. A plathora of surfers, turns out is actually a pretty good leading indicator of economic growth. Welcome to Benchmark. I'm Daniel Moss, executive editor for Global Economics in New York. We're joined today by Bloomberg's Mike Heath, who returned home to Sydney to cover the economy in two thousand and seven after spending the better part of

a decade in Moscow, of all places. Mike, before we dive into the economics of surfing, answer me this question, just how much did you miss Australia and the great leveler the beach scene? Sure? Dan, I mean it was initially irrelevant to me because Moscow, you can imagine, was so exciting and different, and I just jumped into it.

But after five years I had to come back to Australia as my mom was having an operation, and I did spend some time at the beach then, and I think it put out a kernel of a thought in my mind. And when I returned to Moscow, the thought of the sand and the sun and the surf it developed into almost a longing. And then a year after my daughter was born, I decided that for all the

history and culture, rush it off. But I just couldn't deny her a childhood in Australia, and exactly do you say the Australian beach the great leveler and none of us have ever looked back. So you how old is she now? And you're taking out a surf lessons every weekend? I know she's past lessons now. We had a couple in the Southern Hemisphere summer up in Byron Bay. But she's a very good gymnast, my daughter, and so she

was standing almost immediately. She's got terrific balance. So now I'm just trying to teach her to better positioners off to catch a wave. So she's almost got the cart before the horse kind of thing. But she goes out by herself. We go down every weekend and she's this

tiny little speck among big rollers. Two weeks ago she was caught in a rip and the last guard asked me if I wanted him to rescue her, and I held him back and she got out of herself, exhausted because I really wanted her to learn some respect for the power of the ocean. So I think, you know, for a child especially, it's it's something central to you, to your existence in Australia. So let's get into this

economic study. You know, the Study of Breaks is the latest piece of research that functions as an unconventional but surprisingly accurate guide to growth. Others include online advertising, Google searches and even Aliy Barber sales. And now surfing has arrived. Well i'll let our our guest in London, Dr Sam Wills do the details, but just a brief overview of his research. It's incredibly logical when you think about it.

Surfers are basically the explorers hunting the next grave way to conquer, and once they find their mecca, their ocean mecca, there's a pretty good chance that the area is going to appeal to a lot of other people too, and so the infrastructure tends to emerge. Byron Bay in Australia, as Sam mentioned in his research, is a terrific example of that. Um it's become enormous these days. So Sam, come on down, Oh guys think so, thanks very much

for having me. Sam. What is your model if you could explain it, and how did you come by it? So the idea of that the paper is that we're interested in trying to figure out whether or not the natural environment really affects growth. So we know that some things are important. We know that having a river or having a port, having a mountain range, all these things affect the economy, But what about just living in a

nice place. Obviously, this is you know, we think that it might be important, but it's it's really hard to get at. And the reason why it's typicult is, first of all, it's tough to measure how nice a place is to live. And the second is in is uh, it's really hard to sort of isolate that niceness rather than other channels. And so to get this question, a colleague of mine and I decided to use surf breaks.

The reason for that is that these surf breaks are basically randomly distributed all over the world, and we can use that randomness to really isolate the effect of what a what a good surf break is on the economy. And so that's what we've done in the study. So the idea for the study actually came just after I finished my PhD. I was holed up in a cold, miserable library and Oxford for for for every a year, riding up the thesis. And when I finished, I thought

I'd jump on a plane and go somewhere sunny. And really I was looking for somewhere out of the way where I could get a good time away and get a few ways, and I ended up down in Morocco, a little place called taggers It. But I arrived there and the place was absolutely overrun. There were surf shops everywhere, even even the mosque was selling you know, surf wax and uh you know, old wetsuits and that sort of

thing from from out the front. So it got me thinking, you know, maybe there's something to this, this surfing story. And that's when we sort of turn to the data to see if in fact it holds true around the world. You've just mentioned Morocco. Now your research also encompasses Indonesia and South Africa, But these countries aren't going to win prizes for economic management. How do you reconcile your model with the decidedly spotty record of these countries. Yeah, that's

exactly right, and we're not we know that. You know, surf breaks probably is not the veal and end all for growth. You know, at the end of the day, evil comes down to institutions, as we know. But within a country holding everything else equal, places with good surf breaks will tend to grow faster than places without and we've tested this in a few ways. One, we just looked at places with good ways versus places with bad waves,

and we measured how much economic activity there was using satellites. Now, these satellites measure how much light there is at nighttime, and it turns out that's quite a good proxy for growth, and so by doing that, we're able to show that

these places with good ways do tend to grow faster. Um. Some other fun stuff that we did was looking what happened during ALMNO years, when when when the waves in certain parts of the world actually get really good, and we found that the growth really exploded during those years in places with good waves. And then another piece of a fine little experiment we ran was what happens when

a wave is discovered. So back in two thousand and eight, Surfer magazine ran a competition called the Google Earth Challenge, and basically the idea was, you know, a bunch of kids sitting behind their computers tracing through Google Earth trying to find a wave that had never been served before. And the winner was this fantastic wave in Namibia off the coast of the desert. And this way just went for you know, hundreds and hundreds and hundreds of meters

basically perfection. And so we found that after this wave was discovered and after the global surfing community got wind of it, the light around this wave really exploded, which kind of adds more weight to our our hypothesis. And the satellites proved that, Yeah, exactly. And what's the name of this beach in Namibia? So it's a break called Scales in bayh And yes it's worth a Google because this thing is just mechanically perfect waves, just breaking one

after another. It's absolutely beautiful for one and a half kilometers long as well, I think from from memory, Sam, Yeah, exactly right over you know one and a half kilometers long. People are sort of when they surf there by all reports there they're pulling off waves because they get too tired, which you know, um, Sam, tell us, tell us personally what you like about surfing and and what it has to do with the economy, because in the popular mind,

economics is all about charts and statistics and acronyms like GDP. Yeah, well, I guess you know. Surfing. Surfing is good for this sort of study because it really holds like a lot of sway over people's imagination. Uh. You know once once you started surfing it, he puts you in very close contact with nature. It's very meditative in a sense, and it becomes addictive as well. And so for all these reasons, as we know, surfers are willing to go out of

their way to find find ways. Not only that, obviously surfing waves are a bit of a limited resource, and so that that adds to the UM. I guess the exploration that goes on with surfers trying to find waves. So that's the sort of thing that we're picking up in the study UM. Sort of things like you know, people traveling fire and wide to find new breaks and

then they find them. People willing to sort of settle down and and you know, work for less money than make it earn otherwise because they get the benefit of surfing these great waves. Sam, I understand a sovereign wealth fund has brought your argument talk to us about that. Yeah, this is this was remarkable actually so uh most of

my research is actually on sovereign wealth funds and natural resources. Uh. And I was at a conference on something completely unrelated to this surfing stuff and found myself having a conversation with the head of the Moroccan Sovereign Wealth Fund, and when I mentioned this surfing paper, he just his eyes lit up immediately because they have just pumped quite a lot of money into tagger Suit, the very place where

I had the idea for the paper. And the reason, of course is that, um, you know, for the past you know, twenty or thirty years, surfers have been rocking up to this amazing break in Morocco called Anchor Point to surf it. And you know, over time in a tourist infrastructure is popped up to to service these surfers, and now it's it's a bit of a spot on the on the tourist trail for people who aren't interested

in surfing at all. And so the Morocan Sophomore Fund has decided to build a big resort, you know, with conference facilities and and and golf, a golf course and all this other sort of stuff to make make use to that which you know, I guess for the purists, they'd say that it's the place the town is losing something in the process. So if you worked for a hedge fund, you've been now on the hunt for the next tagger Zoot. Tagger Zoot is done. Now you need to find the next big, big thing, right or the

next new thing. That's the idea. So so this sort of this turns out traditional model on its head. There. Yeah, it's not about our agriculture, mechanized farming, industrial revolution, et cetera. It's just about ways. Yeah, that's what all comes down to. And let's talk a bit about technology. You mentioned satellites, but you know, we're becoming increasingly aware of technologies were all in surfing, like battery powered wetsuits for example. How

transformative is that. It's a good point. So obviously, you know, surfing, like all industries, is being affected by technological process progress. Um in, the manufacturer of surfboards is has gone from a cottage industry where everything was shaped by hand too, being sort of mass produced from uh, you know, centralized cad drawings and that sort of thing. So you know,

surfing has certainly been affected by technological progress. On the topic of battery heated wetsuits, this was actually a technology that we studied, so we were interested in what happened when rip Curl released a battery heated wet suit back in two thousand and seven. And basically this just meant that surfers could surf in really cold water for longer

and made it much more comfortable. So from our data set, we looked at all the waves that were above fifty five degrees latitudes, so these really cold water weaves, and we found it after the wet suit was inbedded in two thousand and seven, growth in these cold water places really really exploded relative to everywhere else. So it's interesting you see that this little technological innovation has had actually quite a big impact on the local economies of these places.

What's the coldest place you've served? The coldest place? So it's actually in Cape Town in December, and I'll tell you what, The water is pretty cold, pretty cold down there. That's the middle of summer. It was the middle of summer, but my word, it was, yeah, it was pretty chilly. What you were saying about the patterns of the waves

struck me as curious. We've read about hedge fund stars who have an education in classical music and jazz, I mean, have studied it formally, and what they say it gives them is a sense of rhythm and what's the next key to come next? Is there something like this going on with the waves. Yeah, I guess there could be

something similar there. You know, as I mentioned, it's a it's a very meditative sport and I think you know, in a in a field like academic research, it's always helpful to have, you know, somewhere you can um, something you can resort to to clear your head and just mull over problems and sitting at the back the surf break is really helpful for that. MS interesting sama was

there was a great program on TV here. You might have seen it, or you might have been away when it came out, but it was Tom Carroll in a big wave surfing made of his basically looking for new waves around Australia to surf, and they ended up going out to this place that was on a map, a reef, I think it was on a map, and it was four hours by boat. I think it was southwest of Perth.

So they're out there in the middle of the ocean, just wondering what the heck they're doing and don't know where they're emergence these these ways which they get on via boats or whatever. I mean, it seems at some point every wave will be conquered or is that impossible? Well, no, you're exactly right, Like, I guess it's just a finite

a number of waves out there. Uh, And so eventually, you know, especially with countries like Indonesia and Brazil developing, you know, these are countries with a big population and a lot of coastline. You think the population of surfers in the world is really going to explode in the future. And I guess that's interesting because people are now turning

to two alternatives. So we know that Kelly Slater, there, um many time world champion of surfing is has brought out a new inland wavepool which might be a substitute

for you know, the real deal. And also we know that coastal engineers are working hard on figuring out ways to to create waves in the ocean where where waves weren't there before, so you know, creating artificial uh rock reefs and that sort of thing off off the coast so that when the swells hit them, they make ways that a surfable, right, So just sunder my own point though, but presumably there'd be erosion and stuff, so a break could disappear or reappear or appear you know, out of

nothing as well. Presumably. Yeah, definitely, Actually we found a couple of castions of that. So one famous case was a break in Spain called Wundaka, and this was a really famous break was on the Surfing World Tour at a river mouth and at one point they decided to dredge the river mouth because they thought it would be good for the local economy, you know, getting more fishing

boats in and out. What actually turned out to have happened, as we found by by looking at the satellite data, was economic growth in that little village actually stalled and fell because they ignored the fact that this this surf break was bringing huge numbers of tourists to the town every and so yeah, it just goes to show that, you know, maybe all these these surfers you know, who come out to defend their waves when rock walls are built and ports ports a proposed, they might be onto

something because protecting these waves can actually have a big impact on people's jobs and their livelihoods. Sam, where did you grow up in Australia where you're near the beach? The idea beautiful little part of the world called hawks Nest, a few hours north of Sydney. So I guess yeah, I've been mowing on the topic for a while. Now. Our head of podcasts, Alec McCabe, is through the glass window here in the studio in New York. He's just

finished reading Barbarian Days. And the most important question is what is your secret spot? Knowing full well it may no longer be secret after your answer, Well, I'll tell you what. The great thing about this this study is we've got a database about five thousand ways from all over the world, and we've also got a bit of an idea about how crowded each of those waves up.

So yeah, sitting in our computer is is some pretty useful information and in a sense a bit of a um a checklist for places I'd like to visit in the future. But I guess it would be cheating if I gave it away on the radio today. So if your home is burgled, don't go looking for Alec. Yeah, Sam, it's been a real treat to have you. Thank you so much, Thanks very much, so very much for having you guys. So Dan talking with Sam after that, do you miss your your old home in Bondai? And where

were you in Bondai? And did you sir? Okay, So I did not live on the beach. I lived up closer towards the Bondai Junction train station, but there's no question it was Bonda I, bond I post code. I lived there for six months. In prior to that, I was living in Wallara, which is just you know, a hop, skip and a jump from there, before moving to quiet, a lump of Malaysia, and I've ultimately ended up here in New York. I am still an Australian citizen, though

I am a naturalized American as well. And Mike, just this conversation, it did make me pine. It made it does that to you, doesn't it. It really really does. When I came back to Australia from Russia, I was determined to make my wife like Australia and I found this great little flat at the bottom. It is like a second story on a person's masonette. And it was just on del View Avenue, which just drops down to Tamarama. And when my wife got there, she was like, oh

my goodness, it's like living at a resort. Now, Parking obviously is not like a resort because it's just jam packed in the eastern subives of Sydney. But what a little spot for six or six month introduction to Sydney, what a spot to be. So I did not actually surf on a board. Um. I grew up in Canberra, which for listeners unfamiliar with the geography of Australia, it's about three or four hours inland from the coast, depending

on how you define it. I did body surf at Bondi when I lived there, and you know, as Peter Garrett has said, body surfing is one of the great communal things you can do with nature. It is. It is indeed, I guess the only thing that you'd say about surfing is you just go that bit faster, but

it is. I think, I think there is really something something where you do feel at one with the with the environment when you are on a on a wave and when you feel that power and the speed that sends you on and you get that from body surfing as well. So it's a terrific, terrific sport recommended to everybody.

My son lived in North Carolina for a couple of years and if folks are familiar with the shoreline on the East coast of the United States, there's some pretty great beaches down there, Writesville Beach being one, and ultimately he was spending too much time surfing. I had to do something about it. Mike, you'll have to join this podcast again. I'd love to. I'd love to. It's been a real pleasure to be on here. Thank you very

much for having me. Benchmark will be back next week and until then, you can find us on the Bloomberg terminal, Bloomberg dot com, our Bloomberg app, as well as iTunes, pocket Cast, and Stitcher. While you're there, take a minute to rate and review the show so more listeners can find us and let us know what you thought of the show. You can follow me on Twitter at Moss Underscore, Echo, our guest at at Sam e Wills One Word and Mike at m a Heat One. Benchmark is produced by

Sarah Patterson. The head of Bloomberg Podcast is Alec McCabe. That's the avid reader I referred to. Thanks for listening, See you next time. Get Bat and I Under the Boy