Jo-Ann Suchard

The review of the Significant Investor Visa (SIV) program was pitched by the government as an initiative to spur innovation in Australia. An outline of the revised SIV scheme was released last week, with full details yet to be released.

While the review will lead to some welcome improvements, overall the release represents a lost opportunity to have a significant impact on Australia’s innovative capacity.

After more than a decade of strong economic growth, powered in large part by extraordinary investment from the mining sector, Australia’s national accounts figures continue to disappoint.

The case for government commitment to effective stimulus for innovation in Australia has never been more compelling.

While Australia’s innovation ranking has improved in the past decade, it still lags behind many of the world’s more developed economies. Australia’s innovation efficiency ratio, which measures a country’s ability to capitalise on research and other innovation inputs, places Australia 81st in the world – well below the global median.

Research has shown that small business contributes a disproportionate share of major innovations. Venture capital (VC) funds are an important source of startup funding for small business. Venture capital also supports innovation by funding R&D and providing management skills to commercialise latent technologies and grow the businesses in which they invest.

The Canadian and Singapore governments have implemented similar programs to the SIV, aimed at boosting innovation by channelling new funding to innovative enterprises through venture capital.

Investment in venture capital in Australia is low compared with other developed markets. In the 2013 financial year, the amount of capital invested by Australian venture capital firms was at its lowest level in 11 years – A$111.4 million.

In the same year, the investment by venture capital firms in the US was US$334 billion, in Israel US$1.7 billion and in China, US$3.5 billion. Startup financing accounts for only 0.009% of GDP compared to 0.055% for the US and 0.3% for Israel, according to the OECD.

The SIV program is the path to residency for international investors that commit investment funds to Australia. The concept is simple. Affluent international investors invest a minimum of A$5 million over four years in “approved” investments, after which they receive permanent residency.

The SIV program, introduced by the previous Labor government, has been in place since November 2012. Approved investments under the scheme included ultra-safe government bonds, ASIC-regulated managed funds or shares in blue-chip companies.

These provide some extra liquidity to traded markets, but are of doubtful value in providing new innovation capital, or adding real value to Australia’s economy. They have accounted, however, for the vast majority of funds invested under the scheme.

Since the scheme’s introduction, investors, mostly from China, have invested more than A$4 billion. With only 124 investments made by VC funds in the 2013 financial year, the program review had the potential to dramatically increase the pool of venture capital for thousands of young innovative firms.

Unfortunately, it has fallen short in a number of key areas.

Under the recently outlined changes, up to 60%, or A$3 million of the A$5 million investment, can still be invested in “other” investments which include highly liquid blue-chip investments.

While government bonds have been removed from the approved list, shares and real property are still on it. Although the revised program now includes a VC component, this represents a mere 10% or $0.5 million.

A minimum of 30% is required to be invested in “small cap” firms, with market capitalisation up to A$500 million. There is no specific requirement that any of the small cap investments be in companies involved in innovative enterprises.

Most firms in the small cap category are in mining, energy, financial services or real estate. Some eligible small caps would be considered innovative enterprises, most would not.

If the government was serious about supporting innovation, further criteria would have been applied to keep the focus on innovation capital.

For example, eligible investments could have been assessed based on innovative inputs (R&D spending, employees or numbers of R&D alliances) or innovation outputs (patents, investment in innovative products and processes).

Similar visa schemes in Singapore and Canada do not allow blue chip share and property investments. Although their schemes have a lower total investment requirement, 100% is channelled into areas that stimulate innovation.

International competitiveness of the SIV has been put forward as a reason for the relatively low VC requirement. Perceived competitiveness of the scheme could have been addressed by reducing the total investment required but increasing the percentage allocated to innovation capital. This would have provided a much bigger boost to innovation.

The government’s release contains reference to the possibility of increasing the VC component of the SIV for new applications within two years. It is hard to understand the logic of pitching the scheme so far below other leading schemes, then waiting for two years to raise the VC component to a more meaningful level.

The minimum investment time frame of four years remains unchanged under the revised scheme. While the review states that VC investments may set longer terms, this is not a requirement.

VC funds typically need an eight to 10-year investment time frame to cover investigation and selection of suitable investments; development and growth of investee firms; and execution of successful exit strategies.

Shorter minimum investment periods, such as the five-year minimum under Singapore’s scheme, have tended to drive the funds to provide convertible bond or mezzanine debt financing rather than equity capital.

This restricts the types of firms attracting funding (young startups generally don’t have the cash flow to support debt financing) and the activities funded (debt funding is not suitable for riskier, more innovative ventures).

To truly promote VC funding under the scheme, the government should have set the minimum investment period for the VC component to at least eight years to match a typical fund life.

The period for permanent residency qualification does not need to match the investment period, so this could have been kept at four years under the SIV. Canada’s Immigrant Investor Venture Capital pilot program requires a 15-year commitment, with permanent residency granted when the applicant is accepted.

The recognition of mid-market private equity funds under the revised program is welcome, albeit under the token VC requirement.

These funds invest in enterprises in the A$150 million to A$200 million range and their role is often misunderstood in the context of innovative business ventures.

They provide growth capital to firms that have progressed beyond the startup stage. They can play a crucial role in the success of innovative firms by commercialising latent technologies and have struggled to attract capital in Australia.

Quality and transparency of information is another area which is lacking, in terms of designing a scheme that is capable of efficient and effective allocation of innovation capital.

The sensitivity of revealing financial and performance information on individual venture capital funds or firms makes it difficult for individual investors to select funds. Fund performance and investment valuations are considered confidential data and only aggregated performance across the sector is publicly available.

The Singapore scheme uses independent third parties to evaluate eligible funds and the results are publicly available. A mechanism for fund evaluation under the SIV would help investors to make informed choices, providing more effective allocation of capital.

A clear framework for ongoing assessment, monitoring and reporting is also essential to ensure compliance of participating funds and to track the allocation of funding.

Such a framework could form a basis for informed revisions to the SIV investment criteria. The review outline, as with the existing scheme, contains little information on effective monitoring.

As long as Australia ranks highly as a desirable place to live and raise a family, programs like the SIV provide an opportunity to attract innovation capital that we can ill afford to miss.

The review released by government was another opportunity lost for Australia’s innovative capability. Properly designed, the program could have made a much more meaningful contribution to innovation in Australia.

Jo-Ann Suchard is an associate professor in the school of banking and finance at UNSW Business School. A version of this post appeared on The Conversation.

Joseph Cheng

The Australian government has released a discussion paper – Boosting the Commercial Returns from Research – to further its innovation agenda. It seeks comment on “turning good ideas and research breakthroughs into commercial results” – such as, changing funding criteria to encourage university/industry collaboration and improving assessment of research impact.

The  paper is linked to the Industry Innovation and Competitiveness Agenda, which aims to promote innovation through collaborative efforts among university, industry, and government to strengthen Australia’s competitiveness.

The broader agenda underpinning this debate is an important step in the right direction; but it is selling Australia short on four key aspects which need to be corrected.

As the largest Western society based in the Asia-Pacific region, Australia has both the location and cultural advantages to perform the strategic role of an “innovation broker” between Asia and the West.

The agenda’s focus on the rapidly growing Asian economies obscures the fact that most of the high-income markets are still in North America and, once it recovers, Europe. This focus on Asia is selling Australia short.

Australia can out-compete other countries by leveraging innovations from the West and Asia to create unique and superior global products for the world markets. To build this competitive advantage, we need to attract the best and brightest researchers from the West and Asia to work in Australia.

We also need to recruit multinational firms to set up labs here to conduct high-end R&D. Singapore has pursued this dual-track innovation strategy for the past 30 years with great success, creating new businesses and boosting employment with high wages along the way.

The agenda places a strong emphasis on small and medium-sized enterprises (SMEs). While SMEs can be innovative in many ways, most of their innovations are incremental (with some being disruptive) due to limited resources.

By contrast, big firms such as IBM and Apple have the economy of scale and slack resources to conduct the full range of R&D, including work aimed at producing incremental innovations for the short term, disruptive innovations for the medium term, and breakthrough innovations for the long term.

To not sell Australia short, we need policies to encourage big firms to invest in both medium and long-term R&D, in addition to supporting innovation among the SMEs.

The agenda also focuses primarily on economic infrastructure, neglecting the research infrastructure needed to ensure breakthrough innovations.  Many such innovations, such as the magnetic resonance imaging (MRI) machine, are produced through interdisciplinary research that combines ideas and methods from multiple fields of study.

This is where the commercialisation of research agenda needs to be carefully thought through. Mechanisms to bring together experts from different disciplines and to facilitate joint research among them are in short supply in Australia.

We need to build the physical, professional, and institutional infrastructures both within and outside the scientific communities (including those housed in university, industry, and government settings) to encourage and support interdisciplinary research, with the goal of developing breakthrough knowledge that leads to high value-added revolutionary products and technologies.

There is the perception among some Australian politicians that research-intensive universities such as UNSW do a lot of basic research that has little application value.

We should all know that research which may seem esoteric can often be applied in unexpected ways. For example, the MRI machine would not have been invented without basic research done in mathematics, physics, computer programming and imaging science.

To not sell Australia short in our quest for innovation and competitiveness, we need to support both basic and applied research.

Industry Minister Ian Macfarlane has floated the idea of a fundamentally different way of awarding grants for research. Previously, funding has been tied to a scientist’s track record – generally, papers published in high-quality journals. Now he wants research funding tied to patents rather than scientific papers.

Writing scientific papers is an integral part of the research process to solve complex problems facing society. Just as politicians hold town-hall meetings and make speeches to get feedback on ideas before they introduce new legislation, researchers write papers to get feedback from the scientific community to help refine their study to solve important problems for society.

Not supporting researchers writing scientific papers is like not supporting politicians travelling around making speeches and holding town-hall meetings. The end result would be the same – new ideas not being discussed and evaluated in an open forum. This would be selling Australia short on innovation.

As the world moves toward a more balanced tri-polar global economy with anchors in North America, Europe and Asia, coupled with a parallel shift in the basis of economic competition from efficiency to innovation, Australia is well positioned to become a global leader in technological and business innovation if we aim high and target our efforts in selected areas where the country already has or can build a competitive advantage.

Joseph Cheng is a professor of management and the Michael J. Crouch chair in innovation at UNSW Business School where he directs the Australian Innovation and Competitiveness Initiative.

Chris Styles

In early June, taxis in London, Paris, Berlin and Rome protested against the tech start-up, Uber. The protest hit Washington on June 26.

Uber allows customers and private car-owners to find each other via a smartphone app, providing an alternative to a traditional taxi service. Taxi drivers and owners think it unfair that new business models, such as Uber, are allowed to effectively bypass regulations, lower barriers to entry, undercut prices, and as a result substantially lower the value of expensive taxi licences.

The real story behind Uber – and companies like it – is that it has found a more efficient, higher-quality solution to a customer problem. Uber now operates in 138 countries, including Australia, and is worth around A$17 billion.

Welcome to the world of disruptive innovation.

Dell, Amazon, eBay, Google and Uber have all been part of an unstoppable digital disruption of traditional industries. The question for all of us is: “How do we respond?”
There are probably three broad answers:

1. Deny it’s happening.
2. Push back and complain that it’s not fair.
3. Be part of it.

1 and 2 just delay the inevitable. But the reality is that so often the industry disrupters are not the incumbents. So, is 3 possible?

The present response by corporate incumbents has been interesting. Telstra, for example, has established Muru Digital (Muru-D), a start-up incubator. Telstra has said the goal is not just to identify fast-growth ideas for the company, but also to expose it to innovation and new thinking more generally.

The Commonwealth Bank has borrowed from the digital industry and run “hackathons” to generate new ideas that are implemented rapidly.

The university sector is certainly not a bystander in all of this. Our business model is being disrupted by digital learning, private education providers, emerging high-quality regional and global players, as well as research institutes and think tanks.

And the federal government’s May budget has signalled that domestic undergraduate university education is headed towards a true market-based system.

If we teach our students the benefits of markets and competition in other sectors, we have to embrace it in our own. This means thinking hard about our value proposition to students, the business community and society more generally, and ways to deliver on that value proposition.

We, like others, will need to challenge our long-held assumptions, experiment, be prepared to fail, and embrace new ways. That is, innovate.

We also have another role. If our mission as a leading business school is to enhance business practice through our research and teaching endeavours, then we need to make sure we are producing graduates and new knowledge that encourages and supports innovation and disruption.

This is perhaps one of the biggest opportunities presented by the new world in which we live.

Chris Styles is Dean of UNSW Australia Business School and a professor of marketing.

Martin Bliemel

Australia Post has survived more than a hundred years of shipping information and goods. Then came the internet, which massively shrunk hard copy mail, bills, brochures and so on.

But with the rise of the internet also came the boom in sourcing “stuff” from almost anyone, anywhere, at anytime – and have it delivered to your doorstep. Australians are now globally ranked 2nd for online shopping and want the convenience of the process to end with a parcel, not a fake delivery notice.

Depending on where you live, the fake delivery notice may be a familiar story: using an online parcel tracking code, you see your parcel has arrived at a shop. You then dash off to pick it up. A day or two later, you receive the delivery attempt notice regarding the parcel you already picked up, demonstrating that they are not even trying to deliver parcels to your door. Can you blame them? Not at all. Parcels do not fit mailboxes, people are often away during delivery times, and no postal worker wants to drag around heaps of heavy parcels that probably only end up being returned to the shop. Delivering is just not as efficient as faking delivery.

To address this problem, Australia Post is experimenting with 24 hour smart lockers. One aspect Australia Post can intentionally experiment with is the location. However, the first generation lockers are co-located with Australia Post outlets. Why not place some smart lockers in between shops and closer to you? After all, Australia Post is in the business of delivery, not storage. Placing lockers closer to final destinations would also mean they are emptied faster.

Given their aversion to experimenting with location, my bet is that Australia Post sees unexpected outcomes as risks that need to be systematically avoided. They have probably already devised contingency plans in case parcels contain perishable items that are not picked up until the recipient comes home from holidays. Hopefully they will also have considered that many people (such as the elderly) may not want to be required to own a smart phone and GPS enabled app to pick up their parcels.

Perhaps a Christmas season in Vancouver, Canada best illustrates the dilemma of completing the delivery process. Within one evening, a few centimetres of snow caused chaos. Because of the snow, parcels (and delivery notices) could not be delivered beyond main streets, and instantly piled up from floor to ceiling at many shops. Those who knew (via the internet) that their parcel had arrived had to line up outside while postal workers dug through the mountain of parcels.

In Sydney, the experience is not quite as extreme, but I routinely see long lines of people waiting to do nothing else than pick up their parcel from one of five very busy staff. Clearly, there is more room to innovate the process of final delivery.

Well, Australia Post isn’t the only one who knows customers want more. Mark Bouris and James Packer have just teamed up to challenge Australia Post with their own smart lockers. The image in the report suggest the lockers will be indoors, so those Christmas chocolates from your gran won’t melt away, too.

The expected outcome of this competition is convenience from order to delivery: order your items anytime online, pick them up anytime, too.

What interests me more are the unexpected outcomes of smart lockers. Unexpected outcomes are seen as lucky and can lead to entirely new business opportunities. For example, instead of being seen as too impersonal, smart lockers may be appreciated for their anonymity and cause a surge in ordering potentially embarrassing parcels.

If Australia Post were open to cultivating lucky outcomes, they might intentionally vary how the smart lockers at each location work, and treat each location as a separate experiment. For example, they might enable some lockers to entirely replace the shop by letting individuals pay at the locker to place their own parcels in the locker for a specified recipient to pick the parcel up.

Such an experiment may work for many Gumtree or eBay users, to avoid having to coordinate schedules around each other or the post office.

Managing for unexpected outcomes, including having the right location, technology or business model is a topic I discuss in an upcoming conference paper on the role of luck in innovation.

I completely understand if Australia Post is avoiding unexpected outcomes with most of their billion-dollar infrastructure upgrade. As for the smart lockers, I hope Australia Post and Bouris get a little creative, experiment a bit, and are receptive to unexpected outcomes. For now, I’m hoping the timing and outcome of the smart lockers means we’ll all get our prezzies under our trees, not fake delivery notices.

Martin Bliemel is a Lecturer in Innovation and Entrepreneurship with the School of Strategy and Entrepreneurship at the Australian School of Business. He is also the Director of the Centre for Innovation and Entrepreneurship (CIE), which administers the Diploma in Innovation Management, a multi-disciplinary undergraduate diploma, unique to UNSW. This opinion piece was previously published on The Conversation under “Smart locker competition may also deliver unexpected outcomes“.

From the Knowledge@Wharton today blog.

Before he was the superstar writer/director of the summer’s big budget box office hit, The Avengers, Joss Whedon created the modestly-budgeted musical comedy, “Dr. Horrible’s Sing-Along Blog.” Whedon intended “Dr. Horrible” to serve as something of an experiment in new media production and distribution — at least in part. As Whedon told Knowledge@Wharton in early 2009, “It was equal parts that and the love of the silly….  We said we were going to roll it out for free and then put it on iTunes. We just steamrolled past everybody’s idea of how you market … these things.” The project was, as Whedon characterized it, “a bit of a lark.” But it was also a serious experiment to create and distribute content outside the conventional Hollywood machinery. “[I]f somebody isn’t out there creating a system wherein independent production can thrive, it will wither,” Whedon said.

“Dr. Horrible” stars Neil Patrick Harris as the titular lovelorn villain, Felicia Day as the object of his affection, and Nathan Fillion as his arch-nemesis and romantic rival, Captain Hammer. Originally released online over the span of a week in three roughly 15-minute segments, the original plan was to build audience buzz through the online release and then take the free version offline and make the three-part series available for purchase through iTunes. Shortly after becoming available on iTunes, however, all three episodes could be streamed for free (with advertising) on Hulu. Subsequently, “Dr. Horrible” was released on DVD (and later Blu-ray), could be viewed online through Netflix, and spawned a book, comic book, audio CD, and digital audio download. On Tuesday, the experiment comes full circle as Dr. Horrible debuts on the CW television network in the US.

As Whedon noted in 2009, “The movies, TV — everything is melding, everything is shifting. If you saw it on a movie screen, it’s going to be on your phone. That territory is moving … now in a destructive way because we’re losing residuals. But eventually it’s just going to be an inevitability that … the studios are going to have to rethink how they monetize [content].”

When Whedon spoke to Knowledge@Wharton in early 2009 — roughly six months after “Dr. Horrible” first appeared online — the project had returned “about twice” the original budget of roughly $200,000. At that early date, Whedon reported that iTunes had “been a great boon” and the DVD had “done quite well.” The streamed online video with advertising was the “smallest revenue.”

Despite the “old media” veneer of television, the airing on TV could provide a significant boost to the revenues from “Dr. Horrible.” As independent filmmaker Jon Foy told Knowledge@Wharton last year following the release of his low budget independent documentary, Resurrect Dead: The Mystery of the Toynbee Tiles, “In this world of independent documentary film, broadcast is still where the biggest share of money is. Fewer people buy DVDs. And we all know that fewer people are going to the theatres. More people are streaming [movies] on Hulu and Netflix. Everyone in the independent film world is scrambling to figure out how to monetize that.”

Back in 2009, Whedon was uncertain how his experiment would turn out. “This could just stand out as Camelot and disappear. Or it can be a model that is built on.” More than four years after its original release in the summer of 2008, “Dr. Horrible” is still going strong.

Now that the original 43-minutes of “Dr. Horrible” have played on multiple media, what’s next? Will we see more of Dr. Horrible in the future? Whedon was asked this question this past July at San Diego Comic-Con. As if to prepare the crowd for a letdown he began, “The thing you have to understand is…” He then abruptly cut off the rising disappointment with one word: “Yes.”

As Neil Patrick Harris’s Dr. Horrible states in the original series, “The world is a mess, and I just need to rule it.” Although his character failed to do so, the series that tells his story has progressively conquered nearly every domain of the media landscape – both old and new.

This post was previously posted in Knowledge@Wharton today blog: Old Media Turns to the New: Dr. Horrible Strikes Back

From the Knowledge@Wharton today blog.

Apple’s innovation model is being challenged in its patent spat with Samsung, even as its recent stock price climb made it the most valuable company in the U.S. Wharton legal studies and business ethics professor Kevin Werbach says the patent system in software and IT is “broken,” but the maker of the iconic iPhone, iPad and iPod devices has to keep innovating to stay ahead of competitors.

After a three-week trial in the U.S., the Apple-Samsung patent case went to jurors earlier this week, and a verdict is expected in the next few days. Apple has accused Samsung of copying its patented designs and software, and an adverse ruling for Samsung could result in a ban on some of its products in the U.S. In a countersuit, Samsung has also accused Apple of patent infringements. Today, a court in South Korea ruled that both companies violated each other’s patents, and ordered the firms to pay damages in addition to imposing a ban on sales of some of their products.

According to Werbach, the dispute raises bigger questions about innovation, competition and patents. The patent system has become “a competitive weapon rather than a means of fostering innovation,” he says. The devices, services and systems in the Internet ecosystem depend on other parts of the system, and build on established foundations, he adds. “If restrictive licensing and relentless patent warfare become endemic to the Internet economy, growth and innovation are bound to suffer.”

Many core technological innovations — such as the communication protocols that underlie the Internet and the Unix foundation for Apple’s OS X operating system — are available to anyone for free, thanks to the involvement of governments, academic institutions and far-sighted innovators, Werbach points out. “Vast amounts of money have been made on top of the innovations they gave away.”

Apple’s growing rivalry with Samsung seems understandable. Samsung has the largest share of the global smartphone market — 21.6% in this year’s second quarter, compared to 16.3% in the same quarter last year, according to research firm Gartner. Apple’s market share for its iPhone also grew in the same period — from 4.5% to 6.9%, which places it third in the sector, behind Nokia with 19.9% share.

However, Apple made history when its market capitalization crossed $623 billion on Monday. That makes it worth 17 times as much as Ford Motor Company, seven times as much as McDonald’s Corporation and 13 times as valuable as Facebook, according to a Los Angeles Times report. Microsoft had until now held the crown of being the most valuable U.S. company, based on a $621 billion market cap in 1999.

Werbach says he isn’t surprised about Apple’s valuation peak, although its continued dominance isn’t guaranteed. Market cap honors can be transient because they fluctuate based on investor expectations. Ultimately, innovation will remain the key for the company to stay ahead of its competitors. “Apple makes real things that people pay real money for, with consistently strong margins — which requires huge resources to compete against in a growing global market. That’s a good place to be.”

This blog was previously posted in Knowledge@Wharton today blog: Patent Truth for Apple: Innovate to Stay on Top

Tim Harcourt | The Airport Economist

The world economy is used to surprises – usually on the downside. But one on the upside over the past year has been the reforms in Burma and the lifting of economic sanctions. The surprise reforms of the new Burmese government of President Thein Sein, the election of Aung San Suu Kyi to parliament and the latter’s call for Burma to open up to trade and investment have been monumental changes given Burma’s recent past. Australian Foreign Minister Bob Carr was one of the first foreign politicians to visit Burma since the new developments and other western nations have lifted sanctions and made (tentative) moves to invest in and trade with Burma under the new regime.

But what is the economic impact of sanctions and what happens to economies after sanctions are lifted? The economic evidence is mixed when looking at trade sanctions against South Africa, Southern Rhodesia (now Zimbabwe), Cuba, Fiji and now recently Burma. According to Yale University economist Philip Levy the economic sanctions against South Africa were more ‘psychologically hurtful’ to the apartheid regime than economically damaging, although there is evidence that disinvestment by major institutions like Chase and Barclays had more of an impact than trade sanctions. As in the case of Cuba and Southern Rhodesia, trade sanctions did not have as much impact as restrictions to foreign investment and in any case the economic distortions in the domestic economy (like South Africa’s apartheid labour market distortions) were as damaging as external sanctions. Levy believes that the collapse of the Soviet Union was the key factor in enabling the white minority government to start negotiating with Nelson Mandela and the African National Congress, making South Africa a ‘special case’ in terms of effectiveness of sanctions.

But what about Burma? Will it be a special case? It is clear that Burma has some big mountains to climb economically given the long days of military rule, isolation and the fact that it is a very poor and populous country. As the world’s leading Burma expert Professor Sean Turnell says: “Burma is paradoxically a resource rich but economically poor country.” One reason has not just been the isolation due to sanctions but also the enormous economic distortion of maintaining such a large military presence with no external defence purpose. According to Turnell, Burma kept “300,000 men under arms” (i.e. almost the population of Canberra) despite there being no obvious “genuine external threat”, which is similar to the economic burden placed upon South Africa of the vast bureaucratic apartheid apparatus (not to mention the ethical burden). The defence overhang for Burma has put its fiscal policy under serious strain and created inflationary issues dissuading investment. Maintaining the military apparatus in Burma has also created bureaucratic distortions, sucking away resources from much needed infrastructure, health and education, and handicapped Burma’s human capital development (creating too many idle low skilled soldiers and not enough farmers, teachers or other skilled workers).

The military overhang is the most pressing constraint on Burma’s return to any form of economic normalcy. But now Thein Sein has made some moves in the pro-democracy direction, what can Burma do straight away economically? Turnell has identified ‘low hanging fruit’ such as providing visas on arrivals for tourists, eliminating export taxes and import licences, allowing banks to lend to farmers, and deregulating interest rate ‘caps’ and other financial regulations. But at the end of the day, economic development must come in the agricultural sector and in resources and Burma needs to develop institutions in areas like banking and finance where there is almost no viable sector to speak of. And that’s all dependent on the capacity of Burma to reduce the military presence in the economy and society and create ‘room’ for other sectors. In a country where the armed forces have had so much control for so long, that’s a big ask.

So can Australia play a key role? Bob Carr gave Aung San Suu Kyi a strong assurance that Australia was willing and able to play an important role in Burma’s return to democracy and long term economic viability. Australia has a big role to play in infrastructure given the need for roads, rail, ports and telecommunications to serve its 62 million plus population, BHP Billiton can help in the development of oil and gas, and ANZ can play a similar role to its Pan Asian banking strategy in neighbouring Vietnam, Laos and Cambodia, and Australia’s education institutions can help with human capital development. But most of all Australia’s comparative advantage in agriculture, as well as our expertise in education and tourism, means we are well placed to help with Burma’s capacity building in the same was as we’ve helped the developing economies of Burma’s neighbours in the Mekong Delta. But it will be gradual and ‘softly, softly’ as the world investment community monitors the progress of the pro-democracy reforms.

It will take years to recover from what has happened in Burma since the 1960s, economically, politically and psychologically, but the lifting of sanctions and some luke warm (but positive) responses from investors and exporters (including from Australia) may signify some small steps to recovery on the new road to Mandalay.

Tim Harcourt is the JW Nevile Fellow in Economics and an adjunct professor in International Business Strategy, at the Australian School of Business, the University of New South Wales (UNSW) & author of The Airport Economist:  www.theairporteconomist.com.

Rumours surfaced last week that Facebook is gearing up to launch its own smartphone. According to Facebook employees and others who spoke with The New York Times, the firm has begun recruiting former engineers from Apple to bring its existing plans for a Facebook phone — codenamed “Buffy” — closer to fruition.

The Times article notes that Facebook is not the only software maker looking to develop its own hardware: While the social network giant was dealing with the fallout from its inauspicious late May market debut, Google quietly completed its US$12.5 billion acquisition of Motorola, “which could lead to the search giant’s making its own smartphone.”

And while integrating software and hardware may be the ultimate goal for many tech companies in a post-Apple world, some observers are not convinced that introducing its own smartphone would be the right move for Facebook. “[It] makes no sense at all — slightly more sensible than a Facebook dishwasher, but not quite as sensible as a Facebook toaster, which would alert all your friends every time you make toast,” says Wharton marketing professor Peter Fader. “I can’t imagine why they would want to get into such a competitive, commoditised market, and what they would hope to get out of it.”

But Wharton marketing professor Eric Bradlow, who co-directs the Wharton Customer Analytics Initiative along with Fader, takes a different view. Bradlow notes that firms like Facebook “are realising that today, the ‘point of entry’ onto the web plays a big role.” As an example, he cites Amazon’s Kindle device, which the company sells to consumers for a price that is below its manufacturing cost. Why? “Because then the portal to Amazon products is at the touch of a finger — and the [customer lifetime value] for the person, despite the loss leader on the device, is still very positive.” Moreover, Facebook needs to protect its long-term consumer base, he adds. “Imagine that everyone starts walking around with Google phones, then all of a sudden Google+ becomes the social network hub.” 

The bottom line, according to Bradlow and other analysts, is that as users increasingly rely on their mobile devices to connect to the web, Facebook needs to follow suit — or be left behind. In fact, prior to its IPO, Facebook conceded that the challenges of gaining traction in the mobile market pose a potential risk for the firm — an admission which some analysts believe partly accounts for the stock’s dismal performance.

According to Kendall Whitehouse, Wharton director of new media, it isn’t clear that hardware is the only way for Facebook to balance the equation. Instead, the firm might simply need stronger mobile app development. He points to Twitter as one example of software that translates exceptionally well to a mobile environment, “because its interface is simple and elegant.” That’s not the case for Facebook, which is crammed with features and has an interface that is anything but simple. His advice? “Use the employees at Instagram” — the mobile photo application firm that Facebook recently purchased for US$1 billion — “to develop a really good mobile app.”

This post previously appeared in the Knowledge@Wharton today blog: Calling Facebook: Do You Really Need a Phone?

 Professor Chris Jackson

How you answer the phone may influence your chance of a pay rise, your promotion and even your overall career prospects. Here at UNSW we have recently conducted a study which has analysed the personality traits and biological and environmental factors that predict so-called “career maverickism”.

Workers who lift the receiver to their left ear are more likely to be mavericks that bend the rules and foster new ideas, impressing their bosses, and moving up the career ladder much faster. It is important to foster better ways of working in organisations; working smarter, not harder, by doing things in a more efficient way. Those who break the rules and ‘just get things done’ are much better people to have working for you, if you are interested in the bottom line.

The study, based on 458 workers, found that managers can spot “mavericks” simply by assessing how they answered the phone. It details how those who hold the receiver to their left ear denote a preference for using the right side of the brain, which is associated with creative, problem-solving activities.

I’ve noticed that the GFC means that businesses are increasingly reliant on the skills of internal rule-breakers. Australia may have sailed through the global downturn, but there are still firms out there doing it tough. Firms need to be aggressive and competitive in the global market place. They want workers who don’t do it the same way ‘because that’s the way we’ve always done it’. They don’t want people who are cautious, safe or conservative. Maverick employees have been popularly described as independent thinkers, creative problem solvers, quick decision makers, and goal-oriented individuals. It’s all about avoiding ‘group-think’, encouraging workers to be creative and giving them just an extra bit of room to take measured risks.

The research also shows there is a drawback for people who can’t stop breaking the rules. They tend to be poor team players and are generally unpopular. They rub people up the wrong way. You need a manager with vision who can pick up on their insights, and not be put off by the way they do things. In some jobs what may be seen as dysfunctional behaviour, like risk-taking, is crucial.

Interestingly, men are more prone to “maverickism” than women – which I think suggests a further area for productive study.

There are several icons in the business world who don’t follow the rules – and who make great role models.

Just think of people like Richard Branson, Steve Jobs, or Michael Crouch, who has established a Chair in Innovation at the Australian School of Business. He started Zip Industries because he thought that instead of selling what everybody else sold – because it was much easier to sell – he came up with a new product that actually did what people wanted – give instant hot water. Mavericks are good at perseverance and overcoming hurdles.

They are good for businesses and good for Australia.

Chris Jackson is a Professor of Business Psychology in the School of Organisation and Management.

Centre for Innovation and Entrepreneurship | CIE Blog

My apologies on announcing the winners of last week’s Peter Farrell Cup. Official press release or announcement coming soon. In the meanwhile, I couldn’t help building on the earlier blog post about fear of failure vs failure to start. It was nagging me to create this bubble chart based on the same GEM data with a few changes:

• Fear of failure and entrepreneurial intentions in the same chart as different axes
• Bubble area according to additional population data (since the GEM data is based at the individual level, not firm level)
• Color coded by GEM’s classification (Factor-driven economy: RED, Efficiency-driven economy: BLUE, Innovation-driven economy: YELLOW)

So, if one were to draw a linear regression line through the whole data set, then Australia would probably be middle of the road for the overall data. If you look at only the yellow bubbles (innovation-driven economies), then Australia tends to be towards the upper right, i.e., greater intentions to start (not bad), but higher fear of failure (not good). Does that mean that relative to the other innovation-driven economies, Australia is a country of “intentrepreneurs” or “wantrepreneurs”?

– This blog post first appeared on the CIE Blog.