Category: government

Building a digital hub – and why governments shouldn’t try.

The experience of the Sydney Digital Hub shows why Australian governments struggle to create industrial centres.

“I’m not sure what to do with this,” frowned the public service executive to a group of blank faced departmental staffers. “I’ll take it,” I said to break the silence.

With that, I was on a journey into exactly what Sydney’s startup and digital media communities looked like and learning why governments struggle to build technology hubs.

I’d been working for the state government for two months after a specularly unsuccessful exit from a business and in the shadow of the 2008 financial crisis getting a public service job seemed like a good idea.

Vague ideas

The project being discussed by Bob, my then director, was a single line in the recommendations from the then Premier’s Jobs Summit which was convened in the panicky dark days of the 2008 global financial crisis – “A digital hub will be setup around the Australian Technology Park.”

Bob, and the management of the New South Wales Department of Trade and Investment had little idea of what a ‘digital hub’ was and my position of ‘Manager, Creative Industries” – with a staff of precisely zero – was vague given the state’s support to the creative industries was, and remains, based on throwing big buckets of money at the Hollywood movie studios.

So the Sydney Digital Hub was born and the quest to find out exactly was was needed, or at least would keep the Premier’s office happy, was on.

It immediately became apparent the Australian Technology Park wasn’t going to be the centre of anything as far as Sydney’s startup community was concerned. The complex was too far away from the city and too expensive for most of the businesses.

Replacing what’s existing

“We already have a digital hub,” was the other response. “It’s Surry Hills.” Which was a far call as a large part of the Sydney startup and digital media communities were based in the suburb on the edge of the city’s centre.

This actually worked well as the exact wording of the committee’s recommendation was “create a digital hub around the Australian Technology Park.” In this case, Surry Hills was ‘around’ the ATP.

Eventually the project became Digital Sydney and by the time it was launched, the state had gone through two Premiers, elected another party into government and I was long gone from the department, having lasted just 19 months.

Before leaving, I had managed to steer through a million dollars in funding for the project from the then Labor minister – since caught up on corruption charges surrounding coal mine leases – which, to their credit, was honoured by the incoming Liberal government that took power shortly after.

Dying a slow, unfunded death

That funding was renewed and the project died a slow death, which didn’t really matter as Sydney’s startup and digital media communities had developed despite of, not because of, any government policies. Indeed, the New South Wales’ government’s economic development policies were, and remain, focused on property development and coal mining.

Which brings us to the present day, where the Sydney startup community is upset at the Sydstart conference being poached by the Victorian government and moving to Melbourne on the promise of a million dollars in support as part of the state’s startup program.

The promoters of the now relocated and renamed conference are adamant it matters, but the truth is it doesn’t. In fact the biggest ticket item of NSW government support to the IT sector is the annual CeBIT conference that in truth has added little to the state’s technology industry and many similar initiatives in Victoria have had a similar lack success.

A lack of long term vision

Part of the reason for that lack of success is a lack of consistency and long term strategies, in fact the Australian Technology Park itself is under threat as the state government looks at selling the site to apartment developers despite the protests of the tech community.

Another aspect is state sponsored conferences, hubs and initiatives are not enough to create an industrial centre. There has to be an organic, or business, reason for a hub to develop.

For industry hubs, be they tech startups or anything else, the core need is a critical mass of investors and skilled workers with easy access to markets. For internet based businesses, the latter isn’t an issue which is why Wellington in New Zealand has done better than either Sydney or Melbourne in recent years.

Providing stable frameworks

The role of governments in this is to provide a stable framework for businesses to work within, something that hasn’t been a feature of state or Federal Australian politics in recent years with leadership instability and the increasing prevalence of policy by thought bubble, a good example being the latest scheme to create a new technology hub even further out of downtown Sydney on the site of disused power station.

While the talk of government sponsored initiatives is nice and keeps my former colleagues at the state government occupied writing ministerial briefings on pink paper, building the tech hubs of the future needs motivated entrepreneurs, investors and skilled workers. The best thing governments can do is make sure they encourage all three groups and leave the community building to the community.

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Malcolm Turnbull and the task of turning around Australia

Making Australia a globally competitive economy is a massive task facing the new Prime Minister Malcolm Turnbull

Watching from afar, the reaction to Malcolm Turnbull becoming Australia’s 29th Prime Minister has been remarkable as suddenly the nation seems to have collectively woken up to the fact they are fifteen years into a new century.

In a few short weeks Australian public servants have started engaging in hackathons and business leaders whose idea of an investment was a property plan disguised as a casino have started raising VC funds.

The question though for Australia is this too little and too late after three decades of concentrating on property speculation and betting on a never ending Chinese economic miracle?

New leadership

In Malcolm Turnbull – who only rejoined the Liberal Party in the early 2000s after careers as a journalist, barrister and banker – Australia for the first time in forty years doesn’t have a party apparatchik as Prime Minister.

While this wasn’t a problem during the 1970s and 80s under Fraser and Hawke, by the 1990s the shrinking membership base of Australian political parties meant increasingly the ‘talent’ coming up the ranks was lacking perspective outside the narrow factional groupings most of them were beholden to.

This became brutally apparent with the last three Prime Ministers who were fully hostage to their party factions. In Gillard and Abbott Australia had two party operatives who were no doubt talented in internal party manouvering but hopelessly out of their depths as government leaders – Abbott often seemed to be more interested in settling the battles of 1980s Sydney University student politics than governing the country.

Describing Prime Minister Rudd would take a thesis in political psychology which is way beyond the scope, or interest, of this writer.

The consequences of this were an Australian political leadership that was disinterested in the real economy beyond guaranteeing the social compact that property prices would double every decade and ensure their support in the key swing electorates of suburban Australia.

An insular business community

For the business community the insular focus of Australian society and its politicians worked well too. As the economy turned inwards in the 1990s under the Keating and Howard governments, so too did Australia’s conglomerates who realised clipping the ticket of a consumer economy was far easier than competing on global markets.

The best example of this were Australia’s banks which essentially gave up on lending to business unless it was guaranteed by property. This graph from Macrobusiness illustrates just how the nation’s banks focused on property speculation.

Australian bank lending, courtesy of Macrobusiness.
Australian bank lending, courtesy of Macrobusiness.

That focus on housing and consumer spending underpinned on rising property prices distorted the entire business sector and ingrained in the Australian psyche that the key to riches and prosperity was to get a relatively low skilled ‘safe job’ and borrow as much money as possible.

A good example of this are the regular stories of sweet twenty something wunderkinds who have built multi million dollar property portfolios while working in pizza shops or as administrative assistants.

Possibly the greatest damage Australia’s property obsession has been on the nation’s youth where the message has been ‘don’t gain a globally competitive skill set or education, just get an entry level job at the real estate agents and buy as much property as the bank will allow you.’

Turnbull’s challenge

Like Gough Whitlam, the last Prime Minister not a creature of their party factions, the reform challenge facing Turnbull is immense as 25 years of complacency have left Australia with an uncompetitive economy – as it had for the incoming Labor government of 1972 – with added complexity of having to maintain property prices to keep its economic miracle and social compact ticking over.

The similarities to Whitlam are also striking in the support Turnbull has from the population. One of the striking things on returning to Australia after spending most of the last three months in the United States has been the sense of relief that the inept horror movie of the Abbott government (Attack of the Clueless Zombies) is over and a realisation that Australia has actually entered the 21st Century and not regressing back into the 19th.

Agendas for reform

Entering the 21st Century won’t be easy though for Australia. Completing the reforms of the education sector, started half heartedly by Gillard and then trashed by Abbott in settling the scores of his student politics days, is one major challenge along with reforming tax and social security systems that focuses on asset hoarding and speculation over productive investment.

Possibly a greater challenge is to wean the Australia business sector off its ticket clipping mentality and rediscover its desire to compete globally. It may well be that encouraging the startup sector makes more sense in rebuilding the economy’s competitiveness as many of the nation’s insular conglomerates and their well fed executives are too used to milking the domestic consumer rather than taking on the world.

The end of kitchen renovations

The biggest challenge of all though will be to wean Australians off their property addiction, particularly those under 50 who have neglected their global skills as they focused on renovating their kitchens.

Given the scope of these reforms, such an agenda will require a clear mandate from an electorate that has been complacently accepting guaranteed good times as long as refugees are turned back, the terrorists among us imprisoned and gay couples prevented from marrying for the last 25 years. Making the argument for change is probably going to be Malcolm Turnbull’s greatest task.

For Australia the stakes are high. It’s not likely the 21st Century will be as kind to The Lucky Country as the Twentieth was.

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Attracting the world’s startups

Attracting young workers and entrepreneurs will be the key for prosperous countries remaining rich.

While San Francisco and Silicon Valley remain the biggest magnet for tech startups, many other countries are trying to attract entrepreneurs with preferential visa arrangements and subsidies. Successfully doing this will define the rich nations of the 21st Century.

Israel is the latest country to join the competition with the Israeli Ministry of Economy, the Ministry of Interior and the office of Chief Scientist will launch the program in the next few months which will allow entrepreneurs from around the world to come to the startup city of Tel Aviv for 24 months in order to develop innovative projects.

Entrepreneurs who wish to stay in Israel and open a startup company will be granted a specialist visa. Aryeh Deri, the nation’s Economic Minister said, “tThe Startup Visa will enable foreign entrepreneurs from around the world to develop new ideas in Israel, that will aid the development of the Israeli market”.

Israel’s Startup Visa programs joins Tel Aviv’s city-to-city-collaborations with Paris and Berlin, which allows entrepreneurs from the cities to receive a soft landing package including desks at co-working spaces, advice on visas, regulations and legal issues around starting up companies, as well as one-on-one mentoring assistance and access to the ecosystem in each town.

Just as Israel, France and Germany are opening up, it appears the UK government is tightening up its visa requirements much to the anger of their startup community.

The tech startup community is only a small part of the bigger economy, the challenges facing all these countries is the fight to win the global race for talent and young workers.

For almost all the developed world facing stagnant growth rates and ageing workforces, winning that race will define their prosperity for the rest of the 21st Century.

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Risking a digital recession

Europe risks a digital recession as investment and innovation decline

Europe risks heading into a ‘digital recession’ warn Bhaskar Chakravorti and Ravi Shankar Chaturvedi in the Harvard Business Review.

Chaturvedi and Chakravorti base their concerns on the Digital Innovation Index they created that looks at the sophistication and speed of digital change across fifty developed countries.

Most Northern European countries, along with Japan and Australia, were advanced but their rate of adoption was falling risking their economies dropping behind the researchers found.

W150210_CHAKRAVORTI_COUNTRIESBUILDINGDIGITAL1

The solution offered by the authors was for the countries to encourage investment, immigration and exports.

The only way they can jump-start their recovery is to follow what Stand Out countries do best: redouble on innovation and continue to seek markets beyond domestic borders. Stall Out countries are also aging. Attracting talented, young immigrants can help revive innovation quickly.

A striking problem in Europe is the state of e-commerce across the continent where consumers prefer to buy from US based sites than from those of fellow EU countries.

In many of the nations government Austerity policies have also hurt investment while risk averse cultures have discouraged innovation and new business formation.

For Europe, the risks of being left behind are real and with an aging population a fall in living standards is a likely possibility. It would be a shame if the European Union experiment ends up failing due to a digital recession.

 

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Using city muscle to drive private investment

Can strategic public projects trigger private sector investment

Chattanooga in the US mid West introduced city broadband in 2008 in the face of legal challenges from the existing cable operators.

The operators lost in the courts and were forced to compete with the local, city owned power company’s network.

Now Wired reports Chattanooga is upping the ante by increasing the available throughput of their network to 10Gb.

While that’s good news for those businesses and households in Chattanooga that need those speeds, there’s a much more important effect that Wired points out.

Municipal broadband providers are raising expectations nationwide for what good Internet service means, forcing commercial providers to improve their infrastructure. And by increasing the amount of bandwidth available, they could be setting the stage for the creation of new, more bandwidth-hungry applications. This is how better service goes from a “nice-to-have” to a “you’d-better-have” for the country’s recalcitrant cable companies.

A few municipal projects could be the trigger to getting better services across the country. This is a model that could work in many other fields as well.

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China goes on the tech offensive

The meeting between US and Chinese leaders later this month could mark the pivot of China’s economy

The most important economic relationship in today’s economy is that between China and the United States, despite bellicose chest thumping by both sides their wealth and well being of their industries is inextricably linked.

Against the backdrop of that chest thumping and a slowing Chinese economy, the Chinese and US Presidents are due to meet in two weeks time where trade and security relations between the two countries are at the top of the agenda.

China’s leaders though plan to emphasise their nation’s tech prowess and its importance to the US’s sector, something the New York Times reports has irritated the Obama administration.

What would almost further irritate the US leadership is that US tech giants including Apple, Facebook, IBM, Google and Uber have been invited to attend a Chinese tech summit hosted by Microsoft and the PRC President will be dining with Bill Gates before flying to Washington to meet Obama.

Redmond gets on board

Microsoft’s role in the China Forum is interesting, the company is extending the hand of friendship not just to nations but also to companies that were fierce rivals in the past, just last week the company announced a partnership with VMWare despite deep rivalry in recent years and CEO Satya Nadella is due to appear at next week’s Salesforce conference.

Coupled with Microsoft’s battle to keep offshore customers’ email records out of the reach of US legal jurisdiction, it’s clear Microsoft are playing a long global game with their business plans so the support of China’s initiatives isn’t surprising.

Given China’s strength as an emerging tech powerhouse and its administration’s ambition to move the economy up the value chain, it’s also not a surprise that other US technology companies are reluctant to join the politicians’ games.

Choosing Seattle

The choice of Seattle is interesting as well, while the city is a major tech centre with companies like Amazon and Microsoft based there, it’s far more integrated with the Pacific Rim economies than San Francisco and Silicon Valley. Again this is a loud message to the US tech community.

For China, the success of showing off their technological strengths is an important in sending a message to its East Asian neighbours and the US that the nation is diversifying and shouldn’t be underestimated, a process that Chinese Premier Li described as “a painful and treacherous process” at a World Economic Forum event in Dalian today.

The meeting between Xi Jinping and Barack Obama in two weeks time, and the associated events in Seattle, could well prove to be the marker of where China moved into the next phase of its economic development and its relationship with the  United States.

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Paul Krugman and the era of Bad Ideas

We’re in a world of bad ideas, but it’s never been easier to be an informed citizen

We live in a time where lessons of the past have been unlearned and being right about events does not necessarily mean you will be vindicated, said Nobel Laureate and New York Times writer Paul Krugman in a Festival of Dangerous Ideas event at the Sydney Opera House last night.

Krugman’s talk was on how bad ideas in economics have taken hold and are difficult to shake, the reason being in his view because, as the economist John Stuart Mill said to Parliament in 1866, “although it is not true that all conservatives are stupid people, it is true that most stupid people are conservative.”

A refusal to admit errors

One of the notable aspects of today’s age of bad ideas is how those who proven wrong refuse to admit their errors with Krugman citing the 2010 public letter signed by 23 prominent academics, economists and money managers to Federal Reserve chairman Ben Bernanke warning Quantitative Easing would unleash inflation.

They were wrong but when 9 of the 23 signatories were interviewed by Bloomberg Business last year, not one of them would admit they were mistaken.

For Krugman, it seemed hard to hide his exasperation with these people as he explained, “If you took at all seriously what is taught in economic textbooks then where we are is not surprising” and pointed out anyone who had studied the Great Depression and Japan’s lost decades could see how events were going going to transpire.

Defeating half baked ideologies

What Krugman didn’t discuss during the session was how did we get to a state where many of our political, business and community leaders outright reject the lessons of history and established knowledge, preferring instead often half baked ideologies.

A half century ago, things were different. Ayn Rand’s first television interview with Mike Wallace in 1959 illustrates the prevailing mindset among America’s elites. Wallace is taken aback at Ayn Rand’s philosophy of the individual’s desires and needs above all.


For Wallace’s generation that had been through the Great Depression and World War II, the importance of collective effort in an industrial society were well understood. In just over a decade, the US would successfully put a man on the moon and the rise of Silicon Valley and today’s tech industry were results of that effort.

Today it’s hard to see that sort of communal effort in the face of self interest and wilful, if often profitable, ignorance. For Krugman, his advice for those wanting to push back against this prevailing attitude is not to be too polite and keep in mind that satire and sarcasm are necessities in today’s world.

Being an informed citizen

For those pushing back, facts and research are critical, and Krugman advised one of the audience questioners who was despairing about the quality of information available in the media that the ability to be an informed citizen is greater than ever before.

Krugman’s talk covered many of the Bad Ideas that have got our economy and institutions to where they are today, the challenge for today’s generations is to overcome the narrow, half baked ideologies that dominate today’s policymaking.

In a festival that, despite its name, is notable for a lack of truly dangerous ideas, perhaps suggesting those Good Ideas for the next generation would truly be the antidote for the last thirty year’s lazy and shallow thinking.

Paul attended the Festival of Dangerous Ideas as a guest of Intel Australia.

Image of Paul Krugman byEd Ritger/The Commonwealth Club of California via Flickr

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