Innovation in a handout culture

Sandy Plunkett

When economists Paul Frijters and Gigi Foster released a study in 2015 arguing Australia was a plutocracy where our richest amass their wealth by political connections rather than innovative endeavour, the struggling tech startup community should have been all over the data.

But I guess we were distracted at the time – by politics.

A prime ministerial leadership coup was in the air. A few months later Malcolm Turnbull ousted Tony Abbott. Within weeks, Mr Turnbull launched the National Innovation and Science Agenda (NISA), with a $1.1 billion commitment in government money to harness new areas of 21st century growth.

Sandy Plunkett: Perplexed by how entrenched Australia’s “waiting for government” mindset is

There were high fives a-plenty, fuelled by an optimistic sense that finally, the Australian tech and innovation sector had their man at the top: a fearless, thoroughly modern leader that “got” that 21st century competitiveness and wealth creation was about innovation, IP, entrepreneurship and risk.

Gone was the Abbott-Hockey “lifters versus leaners” meme. In its place, was the “Ideas Boom”. Well, at least briefly. The federal election campaign and the year since, quickly turned our grins upside down.

Frijters and Foster’s research, Rising Inequality: A benign outgrowth of markets, or a symptom of cancerous political favours concludes: “over 80 per cent of the wealthiest Australians have made their fortunes in property, mining, banking, superannuation and finance generally – all heavily regulated industries in which fortunes can be made by getting favourable property re-zonings, planning law exemptions, mining concessions, labour law exemptions, money creation powers and mandated markets of many stripes.”

Their findings were worse than a similar global study reported in The Washington Post which showed that a mere 65 per cent of Australia’s richest got that way via political connections rather than from starting and scaling innovative, global businesses.

Network effects indeed.

That percentage puts Australia in the same league as Indonesia and India, with Colombia scoring highest. (Frijters and Foster’s findings put us on par with Columbia.) By contrast, government-dependent wealth creation in Singapore, Hong Kong, the US and UK scores (surprisingly) in the very low single-digits.

This should be very troubling for a nation that believes fairness and egalitarianism is core to our identity and our social contract.

In the digital era where a very different kind of “network-effect” predominates, producing a winners-takes-all global competitive environment personified by a bunch of savvy, data-driven tech titans from Google to Facebook, Amazon to Alibaba, Australia’s version is opaque and old-school.

There are many negative consequences to this entrenched ‘Game of Mateship‘ between industry and government beyond rising inequality. Just some include: timidity and conformity (it’s hard to speak truth to power when hoping for government favours); regulatory burdens which only the biggest companies can afford to navigate or side-step; rising cost of living (it’s even harder to take entrepreneurial risk when your primary goal is to save for that over-priced house); and a generation of baby-boomer, largely white male leadership which is resistant to change because, well, they’re doing just fine as it is.

Last week in I wrote about Silicon Valley (white, male dominated) culture and the many contradictions of it. Many readers wanted a take on Australian 21st century culture.

Since I’ve been back in Australia, I’ve been trying to understand it myself. It’s the primary reason why I’m writing a book that explores Australia’s response to the digital age and the cultural and structural blocks to success.

One catalyst for me was how often I hear The Lucky Country meme being used and abused by leaders and ordinary Australians alike. Donald Horne, who coined the term, was a favourite history tutor of mine way back at University. So I re-read his iconic work a couple of years ago and was struck by how scathing and still-prescient it is.

“Is it possible in a modern society to preserve all the prosperity and happiness of a nation so inimical to ideas?” he asked.

As I highlighted in a recent feature article, Not like America, “It was 1964, the end of the second Menzies era, the last decade of the White Australia Policy and wool was our largest export. Meanwhile, across the Pacific, the silicon chip had just arrived on the scene and with it, a young Silicon Valley – birthed by giant US defence and aerospace companies and their renegade post-war spin-outs – was poised to usher in the modern computing era.”

Australian’s classic response to Horne’s cultural attack was to re-interpret the phrase The Lucky Country as an “atta boy”. Our capacity for self-congratulation is well-developed. Politicians often like to say Australia punches above its weight in terms of innovation and entrepreneurship.

Really? For a first world, supposedly free-market economy, if we can still count on one hand our home-grown tech and IP-driven global businesses, isn’t that evidence of below-weight performance? You can add to that the several year downward slide in global rankings of innovation outputs.

Yet, we look to government to change us. I’m surprised and perplexed by how entrenched our “waiting for government” mindset is and how that diminishes our “growth mindset”. Was it always that way and I just didn’t pay enough attention?

A tipping point was perhaps a year ago when I attended the ANU Crawford Leadership Forum where 150 or so private and public sector leaders came together (in Canberra) to discuss the state of the world and Australia’s future in it.

This was literally days before the (first) Brexit vote. Few, if any saw it coming. The group was very troubled by rising inequality globally – or its backlash – and equally vexed by rising anti-business sentiment; and of course we talked about “diversity” a great deal. Yet almost all attendees were corporate CEOs and beneficiaries of the kind of political connections Frijters and Foster researched.

The startup sector in Australia should think differently, and in many ways, it does. In the past two months alone, I have attended several Innovation and entrepreneurship workshops where dozens of smart, well-intentioned sector leaders, founders, consultants and academics debate these issues and proffer a range of solutions.

These events are not whinge-fests. But too often “solutions” are about asking state and federal governments for something rather than about fostering a new kind of private-sector-driven entrepreneurship and risk.

Government policy is critical to helping an innovation nation thrive or otherwise. The US, Israel, Singapore, and more recently Britain, have all benefited greatly from huge government support whether in the form of lucrative defence contracts, tax-breaks for startups; government-backed “moonshot” projects; or simply by not penalising entrepreneurial miss-steps.

Any new review of Australia’s innovation system has to think deeply and critically in this context and measure against global benchmarks.

Many of us so-called entrepreneurs and innovators are hopeful that the current work-in-progress, the ISA 2030 Plan for Australia’s innovation system will be just that, forward thinking and globally aware. But we’ve had a lot of these reviews over the past 20 or 30 years and not a lot to show for them.

I am very conscious that many reading this article will think I’m being a bit of a “Debbie Downer.” Australia has enormous strengths, too many to list here. But the digital age and the rest of the world is making new demands on Australia that will impact our capacity for fairness and equality in the next decade and long after. We have to go into this age with eyes wide open.

Along with Donald Horne’s critique, I can’t help but be reminded of the opening lines of Dickens’ A Tale of Two Cities:

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way – in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.”

Holy crap. The more things change, the more they remain the same.

Sandy Plunkett is founder of Innovation Clearinghouse and has had a 25-year career in innovation and entrepreneurship in the US and Australia.

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