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Shunning our own ideas

By Andrew Snell 29 February 2016 8

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The Commonwealth Government’s Ideas Boom is prompting a big focus on the start-up sector in Australia, pushing it forward as the way to replace role of the minerals sector in our economy.

We’ve long heralded ourselves as “the clever country”, and we have a track record of world changing technology and innovation to back it. We have lagged behind other economies with the way our broader business environment and regulations work though. The ‘Ideas Boom’ is all about catching up on those things, getting the nation up with the rest of the world.

The concept is good: a healthy business sector that produces ideas and products means a healthy economy, more jobs and more opportunities. However, as a nation we don’t really seem to know where to start; or, at least, the right people aren’t being asked.

Assistant Minister for Innovation, Wyatt Roy, has spent time in Silicon Valley recently, highlighting a “launchpad” for all the Australian talent the Government is apparently excited to be shipping offshore. He also spent time looking at the superstar start-ups in the Valley, the latest crop of “unicorns”.

At the same time as Mr Roy was in the USA, the Government has released more details of its visa plan aimed at attracting international entrepreneurs to establish in Australia. The details of the plan are currently out for consultation, but there is an important message the Australian Government is sending our grass-roots innovators.

It’s a simple message: you’re not good enough. The message from the Commonwealth Government to the Australian innovation community is moving more and more in the direction of saying “we want to be an innovative nation, but you aren’t up to it.”

With all due respect, Mr Turnbull and Mr Roy, rubbish. The talent we have in Australia, from grass-roots and start-ups to the high end research institutions, is phenomenal. Much as we do in the sporting arena, we punch well above our weight when it comes to innovation. Wherever you go in the world, find an innovation hot bed and before you know it you’ll also find Aussie talent.

The reason it isn’t happening here in the same way as it does overseas is that we refuse to celebrate it. We still hold on tight to the tall poppy syndrome – whenever someone rises up they get chopped straight down. Our innovation scene in Australia has been forced underground. We have great success stories, but they hide until they are near the top and too strong to be cut down.

The current plan from the Commonwealth Government seems to be focussed on the way our innovation ecosystem looks from the outside, not the actual benefit to us in the long term. When it comes to the entrepreneurial talent that drives it, there are two clear messages:

  1. If you’re Australian and can make it, get yourself overseas and get big. Then once you’re a success, please move back home so we reap the reward without providing support.
  2. We don’t have enough good entrepreneurs, or people who would make good entrepreneurs. If you live in another country, bring your idea here and we’ll help you make it!

It’s crazy. We have the talent. What we need is a system and culture that supports risk taking. Sending all our ideas offshore might help them grow, but it will still leave us with a big gap at home. We are in a different business environment, at a global level, to what we used to be. It is no longer a requirement to be based in a country to sell there.

Importing overseas ideas to fill the gap is counter-productive. It won’t bring a direct link to greater investment in the local sector. If anything it will push us towards the models of other places, rather than letting us create a prominent Australian innovation culture.

Changing the basis of an economy is not a one election term task. We need to be in it for the long haul, it needs to start in schools and in workplaces, we need to encourage a different way of thinking. It’s going to take time, but we can do it here. We have the knowledge, the experience and the ambition – we just need to celebrate it and support it.

What’s Your opinion?


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rubaiyat 4:10 pm 03 Mar 16

According to Harvard Senior Lecturer Shikhar Ghosh the odds of startups failing is 75%, but this is of the tiny 1 in 350 which have actually got funding from Venture Capitalists. Venture Capitalists who in turn don’t get much of a return because they are gambling that the tiny number of successful ventures win BIG TIME. Enough to make up for all the failures.

For prospective startups that means 1 in 450 chance of not losing the shirt off your back.

Gamblers are bad at assessing risks. Professional gamblers don’t beat the odds, they just bet against the gamblers with less sense than themselves, ie the vast bulk of betters.

Poker machine players ignore the fact that continually playing a machine that simply takes money away from you is a bad idea.

I have no idea what OZ Lotto costs but the odds of winning are 45,360,620 to 1, so multiply the cost of the ticket by the winnings and you’ll get a good idea of just how much you are being short changed.

Health Insurance companies load up their packages with “benefits” like glasses, health clubs etc because the customers think they can miraculously get more out of those than they put in, somehow improving their odds.

The public’s bad maths is a boon to actuaries and marketers everywhere, as I have countless times pointed out in these forums. The reason products are discounted, change sizes and packaging is to keep consumers ignorant. A very easy task.

One of the prime targets of advertising and marketing is to tap into that inability to work out costs and benefit and panic consumers into buying in fear of missing out on “a bargain”.

THAT is the real world.

Economists live in the fantasy world of assuming everybody behaves on informed, calculated, self interest. The self interest may be the objective by most, but it certainly is neither calculated, nor informed, which is the weakness that corporations, politicians and and any other persons or organisations wanting to help themselves to your money, exploit.

So whilst I applaud the bravery, grit and determination of those trying to assail the battlements of a largely rigged economy, I will be watching cappuccino in hand, from the sidelines. Having sacrificed themselves in the name of glory, anybody actually getting over the walls imposed against them will face their second challenge, not having their rewards stolen from them.

shellcase 3:09 pm 03 Mar 16

My cousin had a smart idea to do with improving the functioning of retrieval robots in warehouses, no one was interested here so he took the idea to the US. He now has branch offices in New York, Boston, Chicago and London. Love his Bentley GT.

As for the ACT Gummint, they are very innovative in adapting shipping containers.

dungfungus 2:25 pm 03 Mar 16

Wayne_k said :

80-90% of Silicon Valley startups fail. They are an amusement for trust fund babies. And many of them unfortunately aim to erode workers’ rights and avoid paying tax in the name of being ‘disruptive’ (a childish term for what amounts to taking us back to Victorian times).

Andrew Barr is about as Labor as a bottle of Grange.

If I had posted that the usual suspects would accuse me of being negative, again.
That being said, I agree with you 100%.

Wayne_k 7:12 pm 02 Mar 16

80-90% of Silicon Valley startups fail. They are an amusement for trust fund babies. And many of them unfortunately aim to erode workers’ rights and avoid paying tax in the name of being ‘disruptive’ (a childish term for what amounts to taking us back to Victorian times).

Andrew Barr is about as Labor as a bottle of Grange.

wildturkeycanoe 6:33 am 02 Mar 16

“The message from the Commonwealth Government to the Australian innovation community is moving more and more in the direction of saying “we want to be an innovative nation, but you aren’t up to it.””

Is this why the government has been slashing funding to the CSIRO, the Cooperative Research Center [part of the National Innovation and Science Agenda] and environmental programs? Are we simply too dumb to be given any funding, so we need to have smarter foreigners come here to innovate us? It is typical of the government to say one thing and do another.
If they didn’t have so much red tape in the way of people who wanted to start their projects on Australian soil, those folks wouldn’t fly overseas to do their business.
To innovate Australia, how about starting young, when kids are still at school? Science seems to have been neglected in our education system [along with the three Rs] and kids just aren’t learning to the best of their ability. There is so much emphasis on learning Spanish and doing colouring in projects, yet kids cannot spell or do arithmetic. How can one learn to be innovative when indigenous history and pop culture highlight so prominently on the curriculum but to the age of fourteen a student has not done one single assignment about physics, chemistry or biology? By Yr 9 I was able to list the first 20 periodic elements, calculate force around a fulcrum and transpose complex mathematical equations. It seems that those things are now best left for college as they aren’t really important enough for our secondary school aged kids to learn.

Spend this “innovation” money on Australians, don’t sell us out to overseas profiteers who will come here with their big ideas, develop products and then take them back to China to be manufactured at a fraction of what we’d have made profits from.

Andrew Snell 4:43 pm 01 Mar 16

Thanks for your questions, Justin. Answers in order, and as rant-free as possible!

– It is my experience over the last 5 or so years, working on my own projects and being involved in numerous ones with and for others. The biggest problem is when an innovator has an idea they genuinely believe in and want to take to the global scale quickly, the response at home is “you need to think more local, start small and then think about scaling”. On one project we had a potential customer in the UK saying “when you can give us 5-10,0000 units we’re in” (which would be around the equivalent potential sales for eastern Australia) alongside a response of “we just don’t think there’s the global potential for this product, but there might be a smaller market in Canberra”. The reduced scale meant the project wasn’t viable. The result was a stalled project due to lack of funds, because we wanted to keep the project based in Australia.

– I agree that attracting talent is good, I would love for Australia and Canberra to become a place talent gravitated to, and you’re 100% right that there is no limit to the number of innovations! The problem at the moment is the access to money. There isn’t enough to really go around as it is, and to attract higher profile talent from overseas in to an environment with limited resources is only going to make it harder for our own innovators and entrepreneurs. There are too many Aussie start-ups going broke or not able to grow to their potential already. A competitive environment is great, but we need to protect our own a little too.

In the medium term I think it is a good idea, but in the short term I think it throws sand in the face of the current group of local start-ups and innovators. If we were underperforming because we were unambitious or less talented, then I would be all for getting some “motivation” in to the mix. When we don’t have local companies desperately wanting to employ out of work engineers, but unable to do so for financial limitation, we should be going after all the overseas talent we can find.

– The issue of availability of investment is a mess. Primarily our population and the immaturity of the angel and venture capital markets make the size of the pool smaller. But we are also much more risk averse. I’m not sure of the current figures but around a year ago Australian investors worked on average to a 1 in 4 success rate, compared to a 1 in 10 in some parts of the world (like San Francisco and parts of Europe). While it’s true the market is mare saturated in those places, as a ratio it still makes the money much less available here.

The amount funded even in successful rounds is also a problem. Here a $500,000.00 angel investment is seen as large. From personal experience there are a lot of individual US investors who aren’t interested at less than $1.5-2 million. Our investors don’t tend to back the higher risk businesses, which are the ones that tend to either fail or quickly become 10+ times returns (the elusive Unicorns). The result is safer but smaller returns, and less money less regularly for reinvestment. Australians don’t tend to like to invest at the early stage.

The crazy thing is that there are international investors who would be interested in investing in Australian start-up companies, based in Australia, if the regulatory environment was as prohibitive.

justin heywood 2:31 pm 29 Feb 16

Interesting article Andrew. I agree that Australia punches above its weight in innovative thinking and that we don’t celebrate success the way that say, Americans do.

But your article raises a few questions:

– you say that our ‘tall poppy syndrome’ has forced local innovators underground, and given your background, it seems you might be speaking from experience. Can you give an example where our tall poppy syndrome held you or another innovator back?

– I can only see benefits arising from attracting talent from overseas. How does attracting overseas innovators diminish the prospects for locals? There’s not a limited number of innovations, surely? I can’t see why this is a problem.

– I see that many innovators seek venture capital from overseas. Is it simply a matter of population that there isn’t sufficient investors in Australia, or are we more risk-averse here? Is there a practical way that governments can encourage local funding?

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