Category: economy

Australia’s contempt for technology

The contempt shown towards the technology sector by Australian governments betrays a deeper problem in the Australian mindset

“The minister sends his regrets….”

Yesterday I commented how the Australian Tech Leaders event would be a good measure of the state of the country’s technology industry. Instead it illustrated the sheer contempt the nation’s political leaders hold the industry.

One of the government’s key platforms in the upcoming election is its Innovation Statement and the accompanying Ideas Boom so it wouldn’t have been expected that a minister or at least an informed backbencher would address a room full of technology journalists.

Instead the government drafted one of their local MPs, Fiona Scott, to make the short drive up the hill from her electorate to haltingly deliver a poorly written speech that focused on her local electorate issues.

To be fair to Ms Scott, the outer Sydney suburban seat she represents is a bellweather electorate which tends to swing between parties as government changes. It also happens to have a workforce that’s beginning to feel the effects of a shifting economy. Her focus on local issues is understandable.

However as a member of a government aspiring to drive a technology driven jobs boom and the representative of an electorate whose workforce is in transition, it is remarkable that Ms Scott is so poorly briefed on tech issues.

What’s even more remarkable is the contempt shown by the government towards the country’s technology sector, a long standing problem in Australian society but particularly stark with the current administration given the Prime Minister’s fine words on the topic.

One of the saddest things about Australia’s squandered boom is how the nation turned inwards at the beginning of the Twenty-First century and decided to ignore the global technological shifts.

The contempt shown by the current government towards the technology sector shows a much deeper problem in the Australian mindset, if the country is to rely on more than its luck in the current century then it’s essential to shake off that way of thinking.

Similar posts:

Gen X and the big economic shift

The costs of the 1970s economic shift are beginning to be recognised.

The single economic event that defines Generation X was the 1973 Oil Shock, the OPEC embargo on the west bought the post World War II era of economic growth to an end.

With stagflation gripping the western world, new solutions were sought and by the end of the decade governments touting ‘business friendly’ economic policies – more accurately ‘corporation friendly’ – were seen as the solution.

As Robert Reich described in the New York Times, these policies were not only a disaster for workers but also for the middle classes and business productivity.

US-economy-employment-wages

A notable aspect missing in the above graph is US productivity growth has since stalled as corporations have focused on stock buy backs rather than investment. The problem has been compounded by the use of tax shelters that have resulted in huge amounts of American corporate profits being locked away in offshore bank accounts.

While those stock buy backs and arbitraging tax regimes have benefitted executives and a small cabal of fund managers, the diversion of capital from productive investment has weakened the US and global economy.

For the baby boomers, even those of the Lucky Generation who preceded GenX, that lack of investment now threatens their retirement lifestyles as incomes and government spending stagnates.

The ‘big business friendly’ ideologies of Thatcher and Reagan defined the late Twentieth Century and continue to dominate government thinking in much of the western world, it may be though that we a reaching the end of that era as the costs to the broader economy are beginning to be recognised.

For GenX and their kids, the costs are being borne now but their parents may be about to feel the costs too.

Similar posts:

Legislating for innovation

Can bureaucrats define innovation? It seems Australia is about to find out as the country’s regulators struggle to decide what businesses will be eligible for taxation concessions under the government’s Innovation Statement.

That bureaucrats are tasked to identify what businesses are worthy ‘innovators’ is worrying for those of us who hoped the new Australian Prime Minister would end two decades of managerial complacency.

Adding to the ‘business as usual’ under the revamped government was a speech by the Minister for Mineral Resources yesterday describing the glowing future of the nation’s resource industry in face of continuing Chinese demand.

While Josh Frydenberg was delivering that speech to Canberra’s National Press Club, the world’s biggest shipping line, Maersk, reported an 83% drop in profits in the face of slowing global trade and collapsing Chinese commodity demand.

Australia’s long term economic policy of riding on the back of a never ending Chinese resources boom is looking shaky, and the luxury of a tax system that favours property speculation over productive investment is increasingly looking unsustainable.

Rather than looking at ways to define ‘innovative’ companies, Australian governments would be better served levelling the playing field to attract investment into new businesses, inventions and productive infrastructure.

Just as a narrow group of tech startups are important so is investment into new plant and equipment for agriculture, manufacturing and tourism. Encouraging workers to attain new skills should also be an objective of the tax system, instead of disallowing school fees and book costs.

The treatment of taxpayers’ education costs versus that of property speculation expenses speaks volumes about the current priorities of the Australian tax system.

For a government wanting to encourage productive, employment generating investment and building a first world economy that’s competitive in the 21st Century, the first priority should be to put all forms of investments on the same footing.

Asking a committee of well meaning bureaucrats to create an artificial group of ‘innovative businesses’ seems unlikely to help Australian workers and businesses meet the challenges of a digital century.

Similar posts:

China’s rocky economic pivot

China’s workforce problems shows an economic pivot is rarely smooth.

As the Chinese economy adjusts to new economic realities, some of the costs are beginning to be felt.

In China’s North-East where the economy is dominated by state owned enterprises in staid heavy industries, workers are moving to more promising regions and local leaders are worried.

However with the Chinese economy pivoting, things aren’t doing so well in the more laissez-faire South Eastern provinces either with workers giving up their precious New Year’s holidays to protest unpaid wages and unfair treatment.

For the Chinese government, this worker unrest is a serious problem. How the country’s leaders try to address the causes could well have global ramifications as the world’s economy faces the reality of massive economic overcapacity.

Out of the box thinking is needed, but it may not be enough to overcome the fears and needs of ordinary, angry workers. What is clear is that an economic pivot is never smooth.

Similar posts:

Does venture capital really matter?

Venture capital investments are concentrated in a handful of cities, but does it matter?

Around the world governments are trying to replicate the Silicon Valley startup model. But does that model really matter?

On the Citylab website, Richard Florida looks at which cities are the leading centres for startup investment.

Unsurprisingly eight of the top ten cities are in the United States with San Francisco and San Jose leading the pack. While London and Beijing make up the other two, the gap between the regions are striking with the Bay Area being home to over quarter of the world Venture Capital investment while the Chinese and London capitals com in at around two percent.

global-startup-cities

While these proportions are impressive, the numbers are not. The total VC investment identified by Florida in 2012 is $45 billion, according to the Boston Consulting Group there was $74 Trillion of funds under management in 2014.

That makes the tech venture capital sector .06% of the global funds management industry.

In the US alone over 2013 small businesses raised $518 billion in bank loans, more than ten times the global VC industry.

What this scale shows is how small the tech startup sector really is compared to the broader economy and, more importantly, how the Venture Capital model perfected in the suburbs of Silicon Valley is only one of many ways to fund new businesses.

Even in the current centre of the startup world, it’s estimated less than eight percent of San Francisco’s workforce are employed by the tech industry although that goes up to nearly a quarter in San Jose.

None of this is to say the startups are not a good investment – Thomas Edison’s first company raised $300,000 in 1878, $12 million in today’s dollars, from New York investors including JP Morgan. The Edison Electric Light Company, while relatively modest went on to being one of the best investments of the 19th Century.

That twelve million dollar investment looks like a bargain today and it’s highly likely we’ll see some of today’s startups having a similar impact on society to what Edison did 140 years ago.

Edison’s success created jobs and wealth for New Jersey and New York which helped make the region one of the richest parts of the planet during the Twentieth Century and that opportunity today is what focuses governments when looking at encouraging today’s startups.

So it’s understandable governments would want to encourage today’s Thomas Edisons (and Nikola Teslas) to set up in their cities. The trick is to find the funding models that work for tomorrow’s businesses, not what works for one select group today.

While the Silicon Valley venture capital model receives the publicity today, it isn’t the model for funding most businesses. Founders, investors and governments have plenty of other options to explore.

Similar posts:

Bringing the Internet to the masses

In India and Myanmar we may be seeing the effects of the internet on developing economies

For the developing world, broadband and mobile communications are helping

In Myanmar, the opening of the economy has meant accessible telecommunications for the nation’s farmers reports The Atlantic.

At the same time, Indian Railway’s Telecommunications arm RailTel is opening its fibre network to the public, starting with Wi-Fi at major stations.

What is notable in both cases is the role of Facebook. In India, Facebook’s project to offer free broadband access across the nation is meeting some resistance and it’s probably no coincidence Indian Railway’s WiFi project is being run as partnership with Google.

In Myanmar on the other hand, Facebook and Snapchat are the go to destination for rural communities, it will be interesting to watch how this plays out as farmers start to use the social media service for price discovery and finding new markets – as Tencent Chairman SY Lau last year claimed was happening with Chinese communities.

One of the promises of making the Internet available to the general public was that it would enable the world to become connected, thirty years later we may be seeing the results.

Similar posts:

Silicon Valley and the rise of Chinese innovation

Uber CEO Travis Kalanick thinks China could overtake the United States in being innovative

Silicon Valley could be soon surpassed by China warns Uber’s Travis Kalanick.

While sceptics could dismiss Kalanick’s claim as his simply sucking up to his hosts in Beijing where he made the comment, or put the statement down to a PR campaign for his company’s renewed push into China, there may be a kernel of truth.

If for nothing else, the Chinese diaspora across the Pacific Rim is known for its entrepreneurial drive. From Bangkok to San Francisco and Sydney, Chinese communities have a reputation for being full of smart and hardworking business people.

Added to the Chinese cultural aspect is history. Fifty years ago car makers in Detroit and motorbike manufacturers in Birmingham, England, scoffed at the idea that their Japanese competitors could overtake them.

Within a quarter of a century they were proved wrong.

Another concern for Silicon Valley is that it could be losing its edge. As veteran journalist Tom Foremski points out, increasingly workers in the Bay Area live in a privileged bubble.

Foremski discusses how younger, creative and innovative workers are finding opportunities in cheaper and more diverse American cities like New York’s Brooklyn.

America’s diversity, and depth of its economy, will continue to be a strength for the foreseeable future but Americans, particularly those in the Bay Area, shouldn’t be resting on its laurels.

Travis Kalanick’s warning might be dramatic, but it isn’t beyond the realms of possibility.

Similar posts: