Disclaimer: This was written during the summer holidays, before COVID-19 became a global pandemic. In many ways, it is more relevant than ever, particularly as we turn our attention to finding our way out of the current economic crisis and reimagine our national economy for the next generation.
Once upon a time, a long time ago (in 2015) the prime minister of Australia spoke the following words:
“The Australia of the future has to be a nation that is agile, that is innovative, that is creative. We can’t be defensive, we can’t future-proof ourselves. We have to recognise that the disruption that we see driven by technology, the volatility in change is our friend
if we are agile and smart enough to take advantage of it.”
- via Business Insider
Today our government is flying a lot closer to the ground, ensuring we have a budget surplus, keeping electricity prices down, by hook or by crook, and fighting culture wars over free speech.
If we think back to those “exciting” days of late 2015, what would it take for Australia to turn itself into a 'start-up nation?' And what would be the benefit?
Lessons from the start-up nation
Increasingly, Australian business leaders are looking to Israel to see what we can learn from a nation that has pulled off an economic “miracle,” in part by becoming one of the world’s pre-eminent start-up and venture capital-driven economies. With little land, a population of just 7-million, and no natural resources to speak of, Israel has, in the 71 years since its founding, become one of the wealthiest, most technologically advanced economies in the world. How did they do it?
A decade ago two American researchers travelled to Israel to identify the key elements of Israeli society that underpin its start-up culture. Their book, “Start-Up Nation: The Story of Israel’s Economic Miracle” contains valuable lessons for our country as we seek to channel elements of their culture to transform our own country’s economy. What are those lessons?
Israelis learn from a young age that debating and thinking independently are essential life skills. Counterintuitively, their mandatory military service helps to develop these skills. Because they are surrounded by enemies, their relatively small military is non-hierarchical and designed to reward creative, independent, and cooperative thinking. They have relatively few senior officers and they devolve tremendous autonomy to bright, young soldiers, both men and women.
The drive to build companies – indeed entire industries – from scratch obviously requires a profit motive. But Israel’s success comes from something deeper: a national mission of survival. That mission sits like a dome across the top of every operation, public and private, imbuing them with purpose that goes to the core of all great organisations.
Some social scientists have called “the city” humanity’s greatest creation. By putting lots of people in close proximity, the multiplier effects of cooperation, collaboration, and skills enhancement take effect. Israel’s tiny geography has amplified this effect, with its universities, military operations, medical facilities and other research centres all closely co-located. That geographic benefit serves to amplify and accelerate the other network effects that well-educated, competitive, independent-minded yet collaborative workers can achieve.
Australia on the right path
Australia is fortunate to have a number of key ingredients to build its own start-up nation, and in many ways we are on that pathway now. Our larrikin spirit, going back to the first days of settlement, and our ability to find ways to survive – and thrive – on the most arid continent on Earth, is a testament to that spirit. Our large and strong immigrant culture also ensures we have a continuous flow of highly aspirational “new Australians,” many of whom bring with them that a sense of inner purpose to achieve something great through education and work.
And in spite of our enormous geography, we are also one of the most urbanised nations, with our three largest cities – Sydney, Melbourne and Brisbane – containing half of our population. Over the last 15 years, we have witnessed the belated establishment of a now thriving venture capital industry, alongside angel investors, incubators, and even start-up themed television shows. Today the ASX is home to a growing number of tech companies, and even a brand new technology index.
Our lack of 'innovation economy'
But many who work in the innovation economy would still say that, as a nation, we’re still not punching above our weight. Why is that? In Israel, the entire nation is supportive of its innovation economy. That means government policy is set, and public institutions and bureaucracies are mandated to support and encourage start-ups in every possible way. We don’t enjoy such circumstances in Australia.
For example, the current government has recently restricted access to the Research and Development Incentive Scheme, and even clawed back funding from start-ups that had previously received rebates. The RDIS is one of the few ways we use tax dollars to subsidise the cost and risk of start-ups, and yet the RDIS isn’t designed, in general, to support technologies that are software-based. It’s a remarkable oversight.
Driving with one foot on the brake
Even more important, our government and public institutions don’t as a matter of course, seek to support local start-ups by giving them preferential treatment in procurement processes. The single hardest thing to achieve with a new business, as every entrepreneur knows, is generating revenue. Our three tiers of government, including our public schools, universities, hospitals and other public institutions, employ more than 2-million Australians and spend upwards of $60-billion annually procuring goods and services. Yet we don’t encourage, much less require, that they seek to preference local innovative companies over global competitors.
This is an enormous oversight, and it amounts to the nation driving with one foot on the brake. The benefits that accrue to countries that seek to support their own start-up ecosystems are many-fold. Employment and tax revenues, of course, but also tailored tech solutions that would likely not be built by an overseas multi-national for a market of 25-million people.
Leave it to luck?
Australia has been, as one author put it, the "Lucky Country". But the world is shrinking, competition is increasing, and if we want to thrive in the coming decades, we need to be smarter, more coordinated, and aggressive in our approach to innovation. It would be good to see some leadership from Canberra and a recognition by our public institutions that they have a critical role to play in the story that will be told.