Denham Sadler
August 29, 2018

Shetler on big bets and boldness

Pearcey Oration

Shetler on big bets and boldness

Paul Shetler: The Australian government must make bold decisions on moonshots

The federal government would do better making “big bets” on technology and moonshot industries, rather than just dishing out startup grants as a route to kick-starting innovation in Australia, according to Malcolm Turnbull’s former digital czar Paul Shetler.

Delivering the prestigious Pearcey Oration address in Melbourne on Tuesday night, the former Digital Transformation Office chief said Australian tech companies needed to be much more ruthlessly competitive to achieve the kind of successes necessary to transform the economy.

The speech focused on how technology was changing economies around the world, what needed to change in Australia, and the role the federal government can play in this process.

“It is very urgent. This is a chance for Australia to master the wave. This is an opportunity for Australia to move from defence to offence; from rent extraction to wealth generation and to a more prosperous Australia for all people,” Mr Shetler said.

“Right now we have this weird world where we have a passive government that rewards past models, squelches new ones and is afraid to act, but has a heavy regulatory burden on industry. I don’t understand that at all. There is lots of regulation and very little action. I’d prefer to reverse that.”

A former executive at Britain’s Government Digital Service, Mr Shetler was handpicked by former Prime Minister Malcolm Turnbull in 2015 to lead his pet project, the Digital Transformation Office. But after the office was restructured into the Digital Transformation Agency in late 2016, Mr Shetler was sidelined and quit the organisation two months later.

But he has remained in Australia, and now leads digital consultancy Hypereal and is a co-founder and partner at AccelerateHQ.

Speaking after an “insane” week where Mr Turnbull was replaced as Prime Minister by former treasurer Scott Morrison, Mr Shetler said the federal government needed to be bolder in its innovation policy agenda. It should focus on making big bets on technology in moonshot industries like genomics or AgriTech.

“There’s a general unwillingness to make bets on the part of the government. The government should make bets. At the moment they are walking away from responsibility,” he said.

“Look at what China does – China decides what moonshots they want, what industries they want to dominate and then they go out and fund them, invest in them or find other ways of funding things and pushing them as a national priority.

“We need to make some decisions about where we want to play.”

Outside of government, Australian tech firms and startups needed to be more ruthless and to embrace competition over collaboration, he said.

“Chinese and US companies coming here are born and bred on competition. Competition is a very good thing, it drives innovation,” Mr Shetler said.

“Necessity is the mother of invention and the usual necessity is competitive pressure. We can’t have innovation without competitive pressure,” he said. “It’s better to aim to take out a competitor than aim to cosily collaborate with them.”

He said this is especially important in the FinTech sector, where too many young tech companies are looking to work with the big banks rather than aiming to beat them at their own games. And the government isn’t helping things.

“How do you reconcile the Four Pillars of banking with the ‘we love FinTech’ [attitude of government]? I don’t see it. They’re contradictory.

“Fintech is inherently disruptive of existing banks, the whole idea of FinTechs is that they’re going to eat the banks.

“How is FinTech going to be successful if government policy is to keep those four banks propped up for as long as they can.”

Australian companies and governments should look to our closer neighbours in Asia rather than just the Western counterparts, Mr Shetler said.

“You’ve got this huge country up north doing amazing things, growing incredibly quickly and operating on very different principles than we do. The People’s Republic of China is going gangbusters and no-one is looking at them to see what we can learn from them,” he said.

Mr Turnbull’s last election campaign placed a huge emphasis on innovation and technological change, but this was punished at the ballots. Mr Shetler said this focus on innovation without an emphasis on protecting jobs and helping workers through this transition was always bound to fail.

“You can’t tell people that they are going to lose their jobs and expect them to vote for us. We saw that happen at the last election. Now they won’t even use the word innovation – they’re terrified. Forget about using the word innovation, just solve the problem and figure out some way that labour won’t be destroyed by this,” he said.

“There has to be an accord between labour, capital and government. We need to force some kind of agreement between labour and the platform providers. There needs to be a good faith effort on this.”

During his brief reign running the DTO, Mr Shetler said he had regular conversations with the former Prime Minister about how to better support Australian tech companies by purchasing locally.

“We as the DTO or federal government buy tons of stuff – we’re the largest single buyer in Australia. Favouring Australian companies in the tech sector would be such a boost. Our problem is we have a free trade agreement with the US. When I was at DTO I was always told I couldn’t do things because of free trade. Maybe we need to rethink that,” he said.

“[The government] is going to be spending money anyway. It may as well spend it and support Australian businesses.”

This was much more important than continually handing out smaller startup grants, he said.

“The last thing in the world a startup needs is a government grant. The first thing in the world a startup needs is a customer. They need to know if they’ve got a product meeting a market needs. The government grant doesn’t tell you that,” Mr Shetler said.

“And if you look at the startup ecosystem, it’s all about extracting grants from government and paying rent in incubators and startup hubs. That’s not a startup world, that’s something else.”

And within government, agencies and departments needed to work to upskill workforces and bring roles in-house rather than relying on contractors.

“We need to use government as an exemplar to drive skills development. When I came in, one of the problems we had was that although the talent pool was very broad, it was shallow. You didn’t have a really critical mass anywhere,” Mr Shetler said.

“Government needs to take ownership of the service it offers, it needs to in-source it – hire the people, train them up in the proper way of doing things and have a cadre in government that can take care of it and rotate with the private sector.”

Mr Shetler began the address by calling out a number of elements in the tech and startup sectors that he views as “snake oil”, including a focus on real estate, such as the recently announced new tech hub in Sydney.

“The idea that if you create a real estate scheme, it will create new businesses … Really? There is lots of real estate and construction in Australia, but that’s not creating new startups,” he said.

“We need to be really careful about this kind of stuff. It is fundamentally not serious.”

A common issue within the startup sector was that there is not enough collaboration between universities and the private sector in commercialising intellectual property.

But Mr Shetler says this is expecting too much from the universities.

“Blaming universities is not helpful. I’ve been told so many times that the problem is we don’t have this pipeline from universities to industry,” he said.

“But it’s not the university’s job to take some ideas for products and act like the product manager in handing it off to the private sector.”

“A real private sector will go banging down doors to get IP that’s valuable and do whatever’s necessary – not expect a professor to figure out how to turn some idea into a business. That’s ridiculous.”

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