Apr 242016

In the face of a volatile oil price and falling reserves, Saudi Arabia’s new Crown Prince is looking at pivoting the economy to knowledge based industries.

That is a hard task in the face of Saudi Arabia’s religious, cultural and work cultures. This is not a society easily dragged into the 21st Century.

Crown Prince Mohammed bin Salman’s plans seem even more daunting when Richard Florida’s 3Ts of the Creative Class are considered – Talent, Technology and Tolerance.

It may well be easy to buy in the technology, but attracting the right talent to Saudi Arabia is going to be hard particularly given it is one of the most intolerant societies on the planet.

Saudi Arabia though has plenty of challenges, so a few big bets may be in order. Tolerance though might be the deal breaker.

Apr 182016
Innovation index versus GDP

After two complacent decades Australia’s pivot away from a mining and housing  based economy is promising to painful. In anticipation of the punishment to come, the nation’s political and business leaders have devised a safe word they hope will ease the pain — innovation.

That safe word was desperately repeated as a group of “innovation rock stars” gathered last week at Sydney’s Knowledge Nation summit, billed as bringing together the nation’s leaders to drive the implementation of the Australian Government’s National Innovation and Science Agenda.

Knowledge Nation showed that despite having a safe word Australia’s Anglo-Saxon, male dominated elites aren’t prepared for an economic pivot and true change in the nation will have to be a grass roots movement led by small business and community groups.

A lack of diversity

Notable in the selection of “key leaders from the innovation, science and technology ecosystem, including entrepreneurs, business leaders, investors, researchers and scientists, and policymakers” was the lack of diversity.

A look of the speaker list showed only four of the fifteen speakers being women and only one of the 15 not being from an Anglo-Saxon background.

One of the baffling things about modern Australian is the how few from non-Anglo groups feature among the ranks of the business, politics or media leaders. Yet Australia’s greatest success has been in integrating the successive immigration waves over the late Twentieth Century.

A visitor to Australia could be forgiven for not noticing the country’s diverse population as the media, politics and business is dominated by those of British heritage. For the country, this is a tragic wasted opportunity and was reflected in the line up of ‘innovation rockstars.’

Disjointed government

The political ‘leadership’ also reflected that lack of diversity with three Federal government ministers — all men and no opposition, state or local figures — lined up to recite the grab bag of thought bubbles that are what now passes as policy in Australian government.

Ministers offered succession of turgid recitals of disjointed programs which do little to address Australia’s structural barriers towards innovative businesses or the wholesale defunding of education institutions although the Innovation Minister’s snarling response to an academic’s question about R&D spending told much about their defensive posture.

The political ‘leaders’ illustrated a key problem in the nation’s pivot. The long term failure of consistent planning across portfolios means no Australian investor, entreprenuer or student can have any confidence in government policies over a five or ten year horizon when policies barely survive one ministerial thought bubble.

Overall though the biggest gap in the Knowledge Nation summit was its focus on government — the real weakness however lies in the corporate sector where inward facing service industries are distributing more on dividends than in research and development.

Inward focus

That inward focus, articulated well by Freelancer.com CEO Matt Barrie who described how almost all of the nation’s twenty biggest corporations are domestically focused service businesses, is the real problem facing Australia as it tries to pivot its economy away from being dependent on the fading Chinese commodities boom and domestic property speculation.

A lack of globally competitive businesses leaves the nation exposed as most employment is in organisations that are unable to survive outside a relatively protected domestic market. It also means these companies don’t see the need to invest in research and development as their fat profits are dependent upon market dominance rather than innovative products and services.

Barrie also had the only challenging idea in a day that promised many of them, the somewhat tired trope of abolishing Australian state governments.

Government focus

It’s quite touching that Barrie sees Australian Federal governments as being havens of intelligent, long term policy making when all the data indicates otherwise. The very idea of Canberra running education given its flip flopping on the Gonski reforms, confused policies on university funding and ideological obsession with funding elite private schools is, quite frankly, derisory.

That the most challenging idea out of the day was the old chestnut of flattening Australian government speaks volumes of the dearth of original thinking coming out of the nation’s business and political leadership.

In truth, Australian business needs to be snapped out of its inward rent seeking focus while the household sector needs to be weaned off speculating on residential property. These require real policy reform and cultural change.

Little leadership

Knowledge Nation showed there no understanding, let alone no appetite for that reform or change from Australia’s elites and as the Australian economy starts to feel the pain from twenty years of complacency we can expect the safe word of ‘innovation’ to be increasingly used by the nation’s elites.

The lesson from Knowledge Nation is Australia’s economic pivot will come from the grassroots. It will be startups, small businesses, community groups and local governments that will lead the change. Australians waiting for government support and corporate leadership will be waiting a long time.

In meantime, squealing ‘innovation’ at every sign of economic pain will be occupying much of the time of Australia’s comfortable Anglo elites.

Apr 082016

For all the talk of digital disruption, who would have thought the old fashioned steel industry would be the industry causing the greatest upheaval in today’s economy?

Globally the steel industry is in trouble. In China, the UK and Australia steelmakers are facing a painful time as chronic overcapacity bites.

Beyond the immediate domestic problems of having a major part of its manufacturing industry shut down, Australia faces an added problem as the nation’s economic policies were based on a never ending Chinese demand for iron ore and coal.

OECD “Excess Capacity in the Global Steel Industry" (2015)

OECD “Excess Capacity in the Global Steel Industry” (2015)

The impending collapse of Bohai steel shows the Chinese industrial boom is now in the past and the onus on Beijing’s rulers is to stimulate a domestic services economy.

For the UK, the collapse of their steel industry adds further uncertainty to a nation that’s already putting its global role at stake with the referendum to move out of the European Union.

Should Britain turn away from Europe, they will need to find some compelling reasons to be competitive in the global economy. Fantasies of some sort of Anglo-centric Commonwealth of Nations won’t be enough to sustain the Little Englanders and their high cost of living.

In fact, the British problems of high costs and decades of underinvestment are common across the English speaking world – although Canada, New Zealand and Australia are particularly at risk in the current economic climate given their dependency on commodities and Chinese markets.

That Chinese curse of may you live in interesting times is proving true again, we are about to enter a fascinating economic period. Our business and political leaders, along with our resilience, are about to be tested. The steel industry is the first test.

Apr 072016
how can governments tax the internet?

Governments are struggling with the new channels of communication and the structures that will manage our societies are far from certain.

Last night the University of New South Wales’ School of Computer Science and Engineering in Sydney held a panel discussion about Digital citizens and the future of government. The group looked at how the open government movement is progressing and how public servants and politicians are dealing with a data driven world.

The panel featured Dominic Campbell, the founder of the UK’s FutureGov who are currently advising the Australian Digital Transformation office; Penny Webb-Smart, the Executive Director of Service Reform for the NSW Government’s clumsily named Department of Finance, Services and Innovation and Amelia Loye, a social scientist who worked on Australia’s first Action Plan for Open Government.

Centralising decision making

One key question for the panel was how governments use data which gives rise to two views. The prevalent view is information systems tend to centralise power – something that has been a feature of the last two centuries – while access to information is a democratising forces that hands control back to individuals and local communities.

Amelia made the point in some respects we’re already at the point where individuals can take control, “the tools for participatory government are already available, we have to start looking at – and talking about – how to use them,” she said.

That conversation certainly isn’t happening at the moment despite the odd blurting of fine words from ministers and public servants and while in some areas government data is being freed up, in others it’s increasingly being hoarded for political purposes or due to ill thought out privatisations.

Commercial in confidence

Private sector data is another problem for the open data movement as many of the functions carried out by governments are outsourced to companies which generally reluctant to share information with the public. This leaves communities with an incomplete picture of the data affecting them.

The main unanswered question in the discussion was the relationship between local and central governments, the panel’s consensus was central government would become more dominant and in the Australian context the states would become irrelevant. This however may not be true.

Centralised government is by no means a given, as the prevailing corporatist ideologies of Western governments strive to cut services it’s likely communities are going to increasingly find ways of delivering those services independent of national bureaucracies and politicians in capital cities.

Cumbersome central governments

Another unspoken aspect was the increasing cumbersome nature of central government. In fast moving economies it’s hard for the decision making structures based in capital cities to quickly react to societal and political changes. National governments may simply be too big to manage the data flows coming into them.

The main conclusion out of the evening’s discussion is there is great uncertainty about the structure of government in the digital era.

Uncertainty over how governments will be shaped by today’s changes isn’t surprising, increased communications and the change in public finances radically altered the role of government last century – the wars and economic downturns of the first third of the century saw the introduction of central government income taxes which central power in capital cities.

Changing communications

Similarly mass media communications, the radio and television, dramatically changed the politician’s role and how citizens interacted with government.

One great mistake today is many of our political, public service and business leaders think the current models are inviolate and fixed when in actual fact they are dynamic systems which are evolving with technology.

Governments are a reflection of the societies and economies they lead. Just as both the economy and society are changing so too will the structures of the public service and politics. We may not recognise some of those changes until well after they’ve happened.

Apr 022016

Three months ago this site speculated if BlackBerry had shipped their last smartphone with the Android based Priv handset.

Yesterday BlackBerry announced disappointing sales of the Priv in their latest quarterly financial report, so things aren’t looking good for the company’s hardware business.

It looks like BlackBerry is a great example of a transition effect  where a product, occupation or business has a brief period of success as an industry changes before being rendered obsolete by those same forces.

The need for executives to access their emails on mobile devices was the reason for BlackBerry’s success so when the iPhone recast the definition of the smartphone and included email as a standard feature of the device, the reason for BlackBerry handsets existing evaporated.

In many respects, BlackBerry are the perfect example of a disruptor being disrupted.

BlackBerry’s hope to remain a stand alone company lies in the security software and services space, a field where management have been investing heavily in recent years. How well they travel will depend now on how quickly they can jettison old business ideas.

Mar 282016

One of the frustrations of being a technologist in Australia is how the media, and population in general, doesn’t pay much attention to technology stories beyond the latest shiny consumer device or quirky stories from the weird and wonderful internet.

So when one of the nation’s main political TV programs, Q and A, decides to do a program on the government’s Innovation Statement with a panel involved in the tech and startup sectors it’s a must watch.

As usual the Q and A format lets the viewer down with the panel suffering from having an unwieldy six guests of which two are major party politicians who tend to trivialise the discussion with party talking points. Regardless of the topic, the show usually ends up an unsatisfactory experience for anyone wanting to explore the evening’s issue.

Startup focus

In the case of last night’s panel the initial focus of  the discussion reflected the startup obsession of most commentary around the Innovation Statement.

While encouraging Australians to start new businesses and take entrepreneurial risks is worthwhile, it’s concerning much of the thinking is based around the current Silicon Valley startup model which is based on easy access to venture capital and ruthless marketing.

Coupled with that is a surprising hostility towards the research community and education establishment, while there the panel featured no discussion of how little Australian corporations invest in research or development.

Lacking diversity

This little genuine research and development carried out by corporate Australia exacerbates the nation’s poor economic and business diversity. The effects of that are crushing for those studying in high tech fields.

One audience question came from a young woman, Elana Nerwich who is studying mechatronics. She correctly noted in Australia, it’s unlikely she will get a private sector job in that field and some of the panelists advised her to stick with it and build their own startup.

While admirable, that advice overlooks how high level workers can’t advance their skills in the Australian economy. This in turn results in more derivative taxi and pizza delivery apps rather than genuine innovations using cutting edge technologies being applied in the private sector, which are the real drivers of economic growth.

Concentrated economic power

Another issue for the Australian economy is how the nation’s economic power is concentrated in the inner parts of Sydney and Melbourne, something briefly flagged by panellist Holly Ransom. The startup obsession exacerbates that concentration of talent and business in the same way it does in San Francisco, if anything it illustrates the weaknesses of applying the Silicon Valley VC model to other societies.

Sadly a deeper discussion on how the Innovation Statement’s benefits can spread beyond the affluent parts of Sydney and Melbourne was beyond the scope or focus of the Q and A panel. That the challenges of regional Australia are restricted to the occasional token program in a country town illustrates both the limitations of Q and A format and the nation’s Sydney centric media.

The greatest take away from the Q and A innovation panel though was how Australians are dependent upon government. Almost all the discussion around how the nation becomes ‘innovative’ was around government policies and not on how does a nations of complacent conformists create a competitive 21st Century economy.

Explaining innovation

Which leads us to the biggest unanswered question from the Q and A show – what does ‘innovation’ really mean?

For the average viewer watching this program the conclusion would be ‘innovation’ is a meaningless string of buzzwords put together by a group of people lobbying for government support.

Those pleas for government funding illustrates the greatest weakness in the current Australian mindset, the nation’s real problem is the private sector’s reluctance to invest in new industries and technologies. Rather than throwing money at startup incubators, the most important thing the country’s politicians can do is reform taxation and corporate governance rules to encourage productive investment over property speculation and incumbent ticket clipping.

Sadly little of that was discussed on the Q and A program partly as a result of its clunky format.

Australia faces a great challenge in pivoting from a successful late Twentieth Century economy into one that’s competitive in the 21st, sadly the Q and A program format left us with nothing more than more buzzwords while failing to convey the opportunities for the nation.

Mar 272016
The community theatre

One of the features of the Twenty-first Century will be how communities take over providing their own services as cash strapped governments find it difficult to provide the services citizens expect.

In many respects the United States is ahead of the rest of the world in this as the decentralised nature of US government sees many functions being the responsibilities of local county and city agencies.

Following the 2008 financial crisis many smaller cities and rural counties found their revenues crunched, for many of them this compounded thirty years of economic decline as local industries folded or fled overseas.

James Fallows in the Atlantic recounts a trip with his wife across the United States where they visited communities rebuilding themselves in the face of economic adversity.

In his long piece detailing how those different communities are rebuilding, Fallows comes to the conclusion a new political consciousness is evolving among the groups working to change their cities. While early, the common objectives of these groups will evolve into a movement.

Fallows marks what will almost certainly be a defining feature of today’s first world nations as their politics evolve around these movements.