Some thoughts on Australian tech & innovation

My reflections on the latest essays in edition two of Inflection Points

Last week, we released issue two of Inflection Points, with four essays on how technology and innovation can play a role in Australia’s future. The reception was encouraging — Jessy Wu’s piece sparked debate about how narrow VC mandates stifle innovation; Jade Lin’s piece on tech in the care economy travelled as far as the Netherlands; and Victor Dominello’s reflections on digital government prompted some thoughtful reflection about how comfortable ministers are of ‘letting go of control over service delivery’, in favour of a centralised digital agency.

To some, this group of essays might’ve seemed like a disparate list of ideas: how do aged care reform, national citizen IDs, software development and venture capital development sit together as a coherent set of policy priorities? In this brief note, I want to share both why we thought each of these topics was important enough to publish and what I took away from each of them. Put together, these essays highlight the mindset shift we hope to inspire through Inflection Points. If you haven’t yet read the essays in edition two (or subscribed to Inflection Points), I’d encourage you to do so.

Victor Dominello’s case for digital government

In Victor’s essay, he argues that Australia needs to learn from New South Wales’ experience to deliver digital government. He speaks to the need to overhaul funding and accountability mechanisms of project delivery for digital projects.

This might sound dry and, for many, it is. But we thought it was an important topic to explore because we believe that the state should honour its end of the bargain to drive productivity increases. Sick of rent-seekers’ game of tennis about tax reform (which seems to have replaced leadership spills as Canberra’s most popular sport), we wanted to highlight (relatively) low-cost, high impact and politically feasible ways to deliver productivity increases. Getting digital government delivered is one of those measures.

I was initially skeptical about the volume of Victor’s $32b of economic benefits that he claimed a digital ID could deliver. I’m wary of economic assessment reports at the best of times, and any time numbers go into the billions it’s tough to wrestle with their relative importance. But then I saw the savings generated by Service NSW. In just four years, Service NSW reduced its cost to serve customers by 80%. At first glance, that seems improbable; but it’s consistent with the experiences of other (private sector) bodies (like banks and telco companies) who have moved away from brick and mortar operations towards digital (and self service) delivery.

I have two reflections on Victor’s piece.

The first is the critical importance of a dedicated leader to deliver the change. Victor is an impressive, high-energy guy who puts his whole self into what he believes in. It’s rumoured that every NSW Minister had heard at least several times his pitch about why digital government mattered. And, because of that, every time he asked for funding, I’m sure that his ministerial colleagues remembered that he was the leader who would put those dollars to good use.

I worry that we don’t have this leadership at a national level. Minister Katy Gallagher is rightly regarded as a capable and effective finance minister. But I don’t know whether it’s possible to also drive the digital agenda at a Commonwealth level while also trying to manage ERC. If I could add one suggestion to Victor’s piece for Anthony Albanese to follow, it’d be to have a single, driven minister be appointed to advance digital adoption across government.

The second is the interaction between government and private sector digital adoption. While at BCG, I worked with large Australian businesses on customer digital adoption. The surprising insights that emerged from these pieces of work were (a) most people prefer digital solutions over in-person services; that is, businesses processes rather than consumer preferences drive analogue service usage and, (b) to the extent that some people (mainly older Australians) prefer analogue services, these preferences are not fixed and can be shaped.

One example of how this has been done is through assisted digital services. In practice, this means that individuals in a branch sit down with a consumer, download an app for them and guide them through the digital process. In doing so, they reduce the need for duplicated and inefficient paper processes. Barclay’s Digital Wings is an interesting example of this: they’ve gone a step further and invested in helping their elderly customers adapt to technology.

I think a digital government (or digital ID) would be important for alleviating both bottlenecks to adoption. On the one hand, it would remove the most annoying reason to go into a bank branch or a telco store – showing them a 100 points of ID. But importantly, I think the government should be well-placed to help older citizens transition to digital. Doing so would help other businesses across the economy transition a greater share of their customers to digital services, further proliferating the efficiency benefits of moving away from brick-and-mortar services. This is the second-order productivity gain which Victor’s proposals could deliver.

Jessy Wu’s take on VC funding

If Victor’s piece showed how government can modernise itself, Jessy’s showed how our capital markets must evolve to fund the businesses that those reforms could enable.

We asked Jessy to write an essay for Inflection Points for two reasons. First, she’s a phenomenal writer who is not afraid to land contrarian takes. And, second, the amount of oxygen that’s been dedicated to changes to the superannuation tax changes is too damn high. If these people genuinely cared about the role of VC funding in supporting Australian productivity, they’d be discussing other elements of innovation policy with more rigour. That’s what Jessy’s piece does (building on an earlier piece of hers in the AFR).

Many of the technical elements of VC funding are covered in wonderful rigour in Jessy’s piece. But the one element I want to reflect on more are the cultural and structural elements of Australia’s labour market which prevent innovation. As Jessy has discussed, the high costs of housing in Australia make it challenging for people to invest in their own ideas by bootstrapping new businesses. And the conveyor belt of university graduates going into law, consulting and engineering firms both reflects these incentives and reinforces cultural expectations.

To be clear, this isn’t yet another “Tall Poppy Syndrome Is The Cause of All Our Problems” take. For what it’s worth, I actually think not that many Australians do take down people who strive to make waves with their careers. If anything, I think many Aussies are overly fearful of the possibility of such a critique (even if it doesn’t eventuate). That cultural fear is what should be grappled with.

I wonder what forms of government policy (or, dare I say, what a new business in the space) could do to address these challenges with Australian risk taking. Jessy’s suggestion of scaling programs like LaunchVic is a good idea. And existing initiatives, like Charlie Gearside’s efforts through Build Australia, have made some headways to drive more ambition in young people. But I think we could go further, by giving young people more time to think about what they want to do. Programs like AmeriCorps in the US (or national service in Singapore) play a role to give young people a few more years before they decide where they want to focus. And that extra time, I think, increases people’s willingness to try something different.

Jade Lin’s thoughts on care sector productivity

We commissioned Jade’s piece because we were sick of hearing people moan about the inevitable decline in productivity we’ll face from a transition to a care economy. While the observation that a larger portion of our economy will shift towards this low-productivity sector is correct, it’s frustrating that this hasn’t been paired with an equally important conversation of what we can do to raise care sector productivity.

One of the most insightful pieces of Jade’s essay is the observation that self-service technology adoption will only rise as elderly people’s comfort with technology rises. This ties closely to a key insight of Victor’s piece, which is that a lot of people prefer doing things digitally than doing things through a manual process. Bringing more technology to care should be a way to increase the agency of those in care. And that’s an important objective.

But more importantly, I think, is the fundamental shift in thinking that Jade’s piece prompts in how we should think about human labour in care. People are right to care about preserving human interactions in aged care. Human interaction and social connection is, of course, a fundamentally important part of aging healthily. Our current hours based funding model aims to preserve such human interactions.

But an hours based funding model doesn’t necessarily achieve that. Where hours are allocated, instead, are often not offering meaningful human connection; they go to the mundane, which does little to support those in aged care. If we can only afford a limited number of hours of human contact for those in aged care, we should make sure that those hours do the best job possible in delivering the human connection the elderly need. If we fail to seek efficiency in aged care in the name of preserving human contact, taxpayers will keep working like dogs to fund it. In the end, we ourselves will lose the very human connection we’re trying to preserve for our parents.

Brandon Sheppard’s industrial policy for software

Brandon rounds out the quartet with a piece which outlines how Australia can bed-down its competitive advantage in software development. At the core of Brandon’s thesis is removing barriers to nurturing talented people in Australia’s software world. While this throws up some equity considerations (which I’ll discuss more later), it’s likely worthwhile to develop one of the sectors that will inevitably become more important in our future economy.

We commissioned Brandon to write this piece because we think Australia does have a comparative advantage in building software (or, at the very least, has a pathway to developing one). We produce more unicorns per dollar invested than any other country (and those unicorns, like Canva and Atlassian) are at the center of the digital transformation of the global economy.

I’ll admit: as someone who cares a lot about maintaining workplace rights, I was a little taken aback by Brandon’s suggestion that we need to make it easier to hire and dismiss people in emerging start-ups. Taking a step back, I realise that some of this response came from the cultural risk aversion I’ve embodied myself. “Maybe we could justify it if we had unemployment insurance, not unemployment benefits” I heard myself thinking.

As Jessy’s piece details, VC funds risk their money going to zero, to get exposure to the upside risk of having found a Unicorn. Start-up workers (as reasonable people in an otherwise tight labour market) should also be able to risk being fired in the first twelve months of their employment, especially given the support of unemployment benefits, to achieve exposure to the huge upsides that employee stock options provide.

Putting industrial relations to one side, I also love Brandon’s recommendation to simplify migration to Australia through changes to the newly created Specialist Skills Pathway. As he points out, this visa can be critical for getting the technical and engineering talent to build a successful business in Australia; and often, the Specialist Skills Income Threshold (SSIT) is too high. But the Specialist Skills Pathway is limited to people being employed by an existing business, so it necessarily excludes those looking to create a business.

One novel approach that Australia could try and replicate is New Zealand’s Edmond Hillary Fellowship. The EHF is a structured fellowship program for aspiring global leaders (often in the start-up, not-for-profit or public impact sectors) to come to NZ; it is tied to the Global Impact Visa (which New Zealand describes as “The World’s Most Entrepreneur-Friendly Visa”). That visa gives recipients of the EHF access to permanent residence. While it may not give ministers the discretion that they hope to have from the current

So what?

My main takeaway from these four pieces is that (obviously) new technologies can make things better, but we need more committed leaders to take more institutional and individual risk to get those things done. None of the benefits discussed in these articles are a given, and it’s scary to take a bet on something like digital aged care or a digital ID when the returns aren’t clear. But if the VC sector has anything to teach us, it’s that we should be more comfortable taking risks, especially when the upside is high. Governments in Australia would do well to learn that lesson before we get left behind.

Let me take four examples (one from each of the pieces). We need a junior minister to bet their career in fixing MyGov and getting a digital ID rolled out across the country. We need an institutional investor to take a gamble on a new model for VC investment in Australia, even if that means they risk sticking their neck out in the superannuation performance testing regime. We need an aged care minister brave enough to shake-up the funding model, to reconsider what forms of care give the highest social ROI to those in care. We need more young and ambitious Australians to be more willing to take a punt on doing something different out of undergraduate, like starting or joining a new and emerging business.

One thing that’s strange about Australia is that despite being culturally risk averse, we have the highest gambling losses in the world. An old friend of mine half-jokingly suggested Australia could take advantage of this by installing Bloomberg terminals next to pokies at Sydney pubs, to improve liquditity in Australian markets. That’s obviously far fetched. But, instead, I hope we can leverage what ounce of risk-loving DNA drives us to bet on the dogs or the pokies, and redirect it toward building the next generation of Australian enterprise.

If Australians really will bet on anything (even a fly on the wall), then surely we can back ourselves to build a more digital, productive, and ambitious nation. Because at the end of the day, technology adoption and business-model innovation is about the confidence to take a punt on new ideas, new institutions, and new people. This issue of Inflection Points aims to remind us that progress doesn’t come from waiting for certainty, but from having the courage to place a well-considered bet on Australia’s future.