Daniel Schlagwein

The Internet is the biggest disruptive innovation impacting on the news genre since the invention of the printing press.

New research has found significant changes in the content of newspapers, and the roles of those people involved with newspapers, as the genre emerges into the digital age.

Our new paper shows how over the last two decades, the cultural and cognitive artifacts that information and communication technologies circulate have become entangled with human and technical actors to the point of inseparability.

Many people in media companies have followed a culture that emerged from the print business – clearly not only had the time come for a change, but that time was well overdue. Most significant in the emergence of the digital newspaper genre is the transition from what we describe as ‘interaction’ to ‘intra-action’. In effect, readers want to engage with their newspapers, taking advantage of what online, mobile and social media technologies can do, and have their say. The newspaper of today is now evolving into a 24 hour a day dynamic online sounding board. Newspapers used to be produced in a linear fashion, with a journalist slaving away for weeks on a story, and then getting one response on the letters page. Now, people want their soapbox too – and new technology means they can co-create a news ‘artefact’.

The paper shows how newspaper as a genre have been transformed in the print to digital transition. The digital medium affords readers new abilities, yet also brings about a struggle for new technology-based business models for media companies. Quite simply, advertisers can now see what they are getting for their money. The number of print readers is going down – hence they pay less for print ads.

Equally, online, advertisers can see their click through rates – and if it is poor, then advertisers won’t pay so much. A large block ad costing thousands is rapidly turning into cents-per-click online. In addition, pay walls for content are not widely accepted by readers who are used to getting their content online for free. It is clear online is replacing print in terms of news consumption but not in terms of financial income. Media companies are struggling to find innovative business models. Currently, there is less money to pay for professional journalism – so newspapers are letting the readers do it, with ‘User Generated Content’ – or, the comment box at the end of each article.

Google and social media are increasingly being used to search and find news. Hence, online newspapers are competing with content any teenage programmer can put up a website – and with a bit of Search Engine Optimisation they can rate nearly as high on Google as a traditional newspaper. You no longer need a huge budget to start a publishing house: All you need are enough readers to add enough comments, feeding back to your news website, your blog, or your Twitter account. Old newspaper companies need to see if they can develop new technologies and business models for both the production and consumption of news, or they will pass away.

Daniel Schlagwein is a lecturer at the Australian School of Business. 

He has co-authored the paper “Understanding the Digital Newspaper Genre: Medium vs. Message” with Anastasia Utesheva, and Dubravka Cecez-Kecmanov.

From the Knowledge@Wharton today blog.

What light does Nik Wallenda’s high-wire act over Niagara Falls, scheduled for tonight, shed on the difference between economists and marketers? Wharton marketing professor Peter Fader explains in this opinion piece.

Everybody has been buzzing about Nik Wallenda and his daredevil crossing over Niagara Falls this week. Elsewhere in the world of sports, the USA gymnastics trials for the Olympics will start later this month, and there’s nary a whisper about it. This difference in public interest/attention makes me think about the difference between the fields of economics and marketing: Economics is like a high-wire act, and marketing is equivalent to gymnastics. Let me explain.

Economists are an interesting breed. They have their heads in the clouds, dreaming of a magical world where people are rational, markets operate efficiently and all kinds of other strict rules apply about what’s right and wrong. In their vivid imaginations, they see upward-sloping supply curves, downward-sloping demand curves and all the implications that arise from these and other assumptions. They are not particularly troubled by facts, often because the actual “rubber meets the road” data that would support or refute such assumptions are hard to find — especially when they’re too busy balancing their delicate curves in a manner that often seems to defy the laws of physics.

Occasionally, economists encounter phenomena that don’t seem to comply with their balancing act — much like a gust of wind endangers the tightrope walker. That’s when their real skills start to show. They conjure up new assumptions and clever twists on old ones to prove that seemingly irrational phenomena are, after all, quite rational. Balance is restored once again. Well-written books like Freakonomics beautifully demonstrate this blend of art and science. It is wonderful to behold such mastery, and the skills required to stay safely perched up high are quite considerable.

In sharp contrast, marketers – like gymnasts – start and finish with their feet on firm ground. The marketer’s desire is to understand the way the world really works – not how it should work under a shaky set of assumptions. Marketers and gymnasts also emphasise the need for balance, but in their case this word means something different than it does for the high-wire economists. Much of the balance for a marketer/gymnast arises from the need to be quite good at each of several different tasks. For the gymnast, this means achieving excellence across a variety of physical challenges (e.g., floor exercise, vault, parallel bars, etc.); for the marketer, it means mastery across a variety of academic disciplines (such as statistics, psychology, anthropology, sociology and – yes – economics).

Overspecialising in any one of these areas is a path to sure defeat; the key is to develop a broad set of skills to ensure that you can take on all the twists and turns required by the problem at hand, while always landing safely on two feet. A marketer wants to “stick the landing” by offering an implementable solution to a real problem – not an ivory-tower explanation that merely proves that the world is still rational.

Because marketing/gymnastics is so deeply rooted in reality, it is gritty work that doesn’t generate the same “oohs” and “aahs” as a tightrope performance. People look up to economists and down at marketers – just like they do when their athletic counterparts are performing. Economists get to rub elbows with presidents; marketers get to sell more deodorant. Nik Wallenda gets a prime-time special on national TV, and marvelous movies have been made about other high-wire heroes such as Philippe Petit (Man on Wire). In sharp contrast, however, can you name a movie about a famous gymnast? Likewise, it’s easy for business leaders to name many economists, but how many can name even a single marketing professor? (I guess I should give up hope that they’ll make a movie from my new book, Customer Centricity: Focus on the Right Customers for Strategic Advantage).

OK, I admit it. While I’m proud to be a marketer, I do suffer from a bit of econ envy – as do many of my marketing brethren. It’s not that we feel intellectually inferior to our economist cousins; it’s just that we wish we could get some of the glory and attention that seem to come so naturally to them. We respect their work quite a bit (in part because our field derives some of its intellectual origins from theirs), but we hope in vain that they would share some of their limelight with us.

But when I stop being wistful about such matters, and get back to work, it’s all worthwhile. I genuinely enjoy the challenges of describing markets and consumers as they really are – not as they should be. I appreciate the opportunity to learn and combine different skills to solve complex real-world problems. I’m glad that companies come to me when they are looking for tangible recommendations and measurable solutions.

And while I know there will never be a Nobel Prize for marketing, at least I can draw some consolation that gymnasts can compete for Olympic gold, unlike the folks who teeter on the high wire.

This post previously appeared in the Knowledge@Wharton today blog: Marketing vs. Economics: Gymnastics or High-wire Act?

 Tim Harcourt | The Airport Economist

A recent visit by a pop icon can demonstrate the vast cultural diversity of the region we simply lump together as ‘Asia’ despite its amazing mix of ethnicities and cultures. When Lady Gaga visited Japan, she was the first high profile foreign female to visit the country after the twin natural disasters of the Earthquake and the Tsunami. Her visit was considered good for morale for a grieving Japanese public in aftermath of the disasters that shook the community literally and psychologically. In fact, Australian Prime Minister Julia Gillard also visited Japan after the disasters and was the first foreign head of government to spend some time there (then French President Nicholas Sarkozy only touched down briefly).

But Jakarta is not Japan. In Indonesia Lady Gaga was gagged and concerts cancelled. Is this surge of political nationalism related to the upcoming elections and parties jockeying for position? Several foreign observers of Indonesian politics say it isn’t anything to do with elections but just the need to respect the values and mores of the world’s largest Muslim population. And in any case many touring acts come through Indonesia and the rest of South East Asia without incident.

But political nationalism is one thing what about economic nationalism? With elections coming up, Indonesia is no different than any democracy with parties calling for tariff changes and protection of local industry. This is important for the Australia-Indonesian economic relationship too given our strong trade and investment links in Indonesia. I realised how important the bilateral ties were when I was recently the co-host of the the distinguished Australian Alumni Awards in Indonesia with Frida Lidwina, the host of Metro TV in Jakarta, and saw how many Indonesian business and political figures were Australian educated and very close to Australia. In fact, this was at the time of the live cattle issue on Four Corners, and one of Indonesia’s most famous Australian alumni was the Mahendra Siregar, Vice-Minister for Trade (now Finance who went to Monash), and there was plenty a tension in the room. But the Vice Minister was gracious in his remarks and it took a very skilled and professional performance by Australia’s Ambassador to Jakarta, Greg Moriarty to steer us through the issue. If anyone ever wanted to see the skill and professionalism of our diplomatic corps, I’d point to that performance by Ambassador Moriarty and his team in the Embassy in Jakarta as a great example of excellence.

But despite the headlines of Lady Gaga and live sheep, when I interviewed Australian businesses in the country most have found Indonesia to be quite accessible with a prosperous, growth story despite the political economy challenges of dealing with such a massive population on a diverse archipelago. For example, in financial services, according to the ANZ’s Joseph Abraham, the Bank has expanded from “2 to 28 branches in 4 years, which would be harder to do in alternative markets like China and India.” Abraham describes Indonesia as “a good growth story, with high rates of return, estimated to be around 30 per cent higher on average than other markets.”

Justin Collings of Leightons in Jakarta agrees. “Rates of return are healthy in Indonesia, there are risks but you must understand the risks and put a value on it,” he explained. Collings, whose operation with Leightons is 80 per cent in mining, is also building crucial rail and road infrastructure, does refer to changing governance in Indonesia but says that: “Regulations change a lot and are a challenge, but they can be managed effectively and the negative aspects minimised.”

Collins points to strong education levels as important to business practice in Indonesia. “Many of our Indonesian staff are Australian educated, and/or trained in Australia. For managers, the International schools in Jakarta are excellent, including the Australian and New Zealand schools.” Collins says that “they know you are living the life of a contractor because your kids are sick and your furniture is broken, but we’ve has none of those issues here in Indonesia.”

Another Australian executive in Indonesia, Greg Patching, of Orica, also regards education relationship between Australia and Indonesia as crucial to the business expansion that Orica is undertaking in Indonesia. “We regularly send Indonesian staff to Australia for technical and cross cultural career development, they learn a lot there and we certainly learn a lot from them as a result.” Patching, a Fremantle Dockers supporter and currently on the playing list of the Jakarta Bintangs Australian rules football club (a notable fixture of the club was the late Craig Senger, a wonderful Australian trade diplomat in Indonesia and friend of the author), says that “life does have its moments in Indonesia, but it’s nothing like the hardship of following the Fremantle Football Club.”

Speaking of football, another Australian business figure in the region, Andrew Glynn of agricultural company Agspec Asia, has forged a partnership with the world famous Liverpool football club’s International Academy and Soccer Skills to bring sport and recreation to rural Indonesia. Together with the Liverpool Football Club International Academy and Soccer Schools (Indonesia), Agspec has set up a community programme for the kids of farmers in the poor rural parts of West Java. According to Glynn, “I grew up in rural South Australia, near Mount Gambier, so I wanted to do something for farm kids here in Indonesia who really do do it tough. The generosity of the mighty reds – the legendary  Liverpool Football Club – is making it possible for these kids to reach their potential.” Indeed, Liverpool legend Bill Shankly would be proud.

So Lady gaga is not in Indonesia, but Liverpool is in, along with many Australian businesses. Given its still only a decade on from the Asian crisis of 1997-99 which saw IMF intervention and real problems for the nation, Indonesia has performed solidly. Indeed, with its new found robust democracy and economic growth rates, Indonesia continues to surprise us on the upside. But cultural sensitivity still matters on the world’s largest Muslim nation. So to think, probably the only thing Lady Gaga had to succeed in Indonesia, which should not have been too much of an effort, was to put on some pants.

A version of this blog post recently appeared in the Australian Financial Review.

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. He recently co-hosted the distinguished Australian Alumni Awards in Indonesia.

John Taylor

The government is proposing to reform income tax transfer pricing, with the aim of increasing the amount of tax paid by foreign companies.

The issue became inflamed when Google published its annual results to the Australian Securities and Investment Commission, which showed that it had reported a loss for its Australian business in 2011, and paid a total of AU$74,176 in tax. Some commentators expressed surprise at this.

The government argues that Australia needs to ensure there is not what it calls an “erosion” of the tax base owing to the multinational nature of the Internet sector and the ability of technology companies to shift profits around the globe among different tax jurisdictions. Although governments around the world are belatedly trying to claw back lost tax revenues from the digital economy, their ability to do so may be marginal at best.

Transfer pricing relates to intercompany transactions within multinational companies. Tax authorities can make judgments on whether multinationals are paying the requisite amount of tax on revenue actually earned in the local jurisdiction, with the aim of preventing the company shifting profits to lower tax jurisdictions.

Australia only taxes foreign resident companies on income that is sourced in this country. Australian advertisers booking ads with Google are mostly billed by its Irish subsidiary, and Google Australia hasn’t earned any income on which it should pay tax.

Therefore reforming income tax transfer pricing won’t do anything. It might be that Google Ireland invoices Australian advertisers for advertisements placed on a website on a server located outside Australia. Google can structure the transaction so that Australian law will regard the income as not having an Australian source and hence not being taxable here. There is not likely to be a transfer pricing issue at all, because transfer pricing involves dealings between entities that are connected with each other – under tax treaty rules – or that are not dealing at arm’s length – under domestic law. If Google Ireland and Google Australia are legally at ‘arms length’ there is no transfer pricing issue.

Therefore changing the transfer pricing rules won’t fix the issue with the amount of tax that Google pays in Australia. If Senator Conroy really thinks it is a solution, then he doesn’t understand the problem. The only answer would be for Australia to either change its rules for determining when income has an Australian source or to tax foreign residents on some basis other than their income has an Australian source. Either course would be inconsistent with current international norms.

Professor John Taylor is the Head of Taxation and Business Law at the Australian School of Business

A temporary exit from the eurozone by Greece would go a long way towards adjusting trade and other imbalances that would relieve pressure in the current eurozone crisis and quickly restore growth to the country, Wharton finance professor Franklin Allen said. The problem with many of the other fixes being suggested for the eurozone at present: They take too long to work, and would allow the crisis to escalate, perhaps dangerously. The quickest solution is temporary leave from the eurozone — in this case by Greece – that would lead to normal growth within one to two years, and allow Greece to rejoin the group in “five to 10 years,” Allen said.  He made his comments in a keynote address at the recent Wharton Global Alumni Forum in Milan.

A video of the full presentation is available below:

This post previously appeared in the Knowledge@Wharton today blog: A Temporary “Grexit” Is Just the Right Respite.

Dr Mehreen Faruqi

In 2012, the focus of the 40th World Environment Day and the UN Conference on sustainable development, Rio +20, is on greening world economies.

The United Nations Environment Program (UNEP) defines a green economy as one “that results in improved human wellbeing and social equity, while significantly reducing environmental risks and ecological scarcities”.

However, despite a focus on sustainability, we are currently in the midst of an economic crisis; our environment is under threat from the significant looming effects of climate change; global forests are shrinking; rates of species extinction are higher than ever before; and although health and wealth may have increased on average, these benefits are unevenly distributed, and the divide between rich and poor nations and individuals is deepening.

So why is it that after decades of environmentalism and sustainable development, we live in a world where environmental degradation is worsening and poverty and hunger increasing?

It would be unfair not to recognise that effort has been put into minimising human impacts on the environment. Governments have instituted environmental legislation and regulation, progressive businesses place increasing emphasis on social responsibility, and individuals are adopting environmentally friendly practices.

However, much of the focus has been on discrete, easier to manage issues such as industrial air and water pollution, and some ‘trophy‘ projects such as green buildings, renewable energy, water, and waste recycling. Progress on resolving harder to manage ‘wicked’ problems such as global climate change, increasing water scarcity, and inequalities of wealth distribution has been slow and patchy.

Traditionally, environmental problems have been framed as narrow, isolated bio-physical phenomena with linear cause and effect chains which have been ‘fixed’ using technical solutions such as pollution control e.g. air filters on factory stacks. This has resulted in short-term, band-aid solutions that treat the symptoms only while underlying causes persist over a much longer-term.

A complex systems view of the world where our economies, societies and the earth’s ecological systems are inextricably linked and form a dynamic interdependent system has challenged these traditional notions of a mechanistic and fragmented world.

More and more, sustainability problems such as climate change, natural resource depletion, and social and economic inequities are seen as multidimensional, having many interconnected causes and effects, uncertain and unpredictable consequences, and no clear-cut solutions.

Addressing such problems requires not just scientific and technological solutions but also significant, and some even argue radical, changes in societal systems, values and lifestyles as well as in government and corporate policies and practices.

If we are serious about greening our economies and achieving sustainability, this chasm between traditional and contemporary views of the world will have to be bridged urgently, so innovative and creative thinking can be unleashed.

But this requires making fundamental changes to the way we approach problems, rethinking business as usual models of growth and development, and shifting away from unsustainable patterns of production and consumption.

These changes have to be underpinned by ‘strong sustainability’ recognising the intrinsic value of the environment and the dependence of our society and economy on our natural systems.

Our neoclassical economic systems of accounting such as cost-benefit analysis favour short-term profits and do not accurately reflect the negative social and environmental consequences that occur over the longer-term.

We measure growth and development using GDP, which in fact only measures economic activity. Measuring long-term sustainable growth and wellbeing requires indicators that reflect social, environmental and economic growth. Failing to do this could mean another half a century of rhetoric about green economies without any appreciable change.

Such profound change that contests long-held views of ‘thinking and doing’ essentially requires a ‘new’ and courageous model of leadership in government, organisations and communities. Rather than leading through individual power and authority, new leaders prefer distributed leadership and are collaborative, flexible and adaptive.

Changing dominant mindsets is no easy task, and exercising new leadership is risky and dangerous as it requires stepping out of the security of business-as-usual practices into unknown situations to confront conflict, uncertainty and unpredictability.

The choice of not taking this risk, however, may leave our future generations with no choices at all.

Mehreen Faruqi is academic director of the Master of Business and Technology (MBT) Program and Associate Professor at the Australian Graduate School of Management (AGSM) within the Australian School of Business at UNSW.

This article first appeared on the Drum, 5 June 2012.

Greg Combet AM MP
Minister for Industry and Innovation
This post first appeared on the CIE Blog.

The Australian economy is globalising and fast. One facet of this trend is the way Australian entrepreneurs are criss-crossing the world, building experience and networks and selling not just themselves and their products and services, but the view of Australians as global entrepreneurs.

A series of articles in the Sydney Morning Herald has bemoaned this so called “brain drain” as, mostly young, entrepreneurs depart our shores in search of investment and markets for their ideas. The fact is that these journeys are part of the economic and social transformation that shows a path to the future of the Australian economy. This is no “brain drain” but actually a small country finding opportunities in a global market and punching above its weight.

As these entrepreneurs know, a global audience of 7 billion investors, customers and partners brings tremendous opportunity. Closing our borders or limiting our aspirations to the domestic market alone will only limit the entrepreneurs’ growth and our economy’s growth.

We need these entrepreneurs to mentor and introduce local businesses to global networks, to share their experiences and to promote Australia’s strengths around the world. We don’t want to lose them – but we should recognise that they don’t need to be physically here to add value.

Our long-term competitive advantage is in the ideas and energy of our people. The coming century will be shaped by significant geographical, demographic and technological trends.

Two of those technological trends that our entrepreneurs are already tapping into are clean technology and ICT. The Government is making significant investments in infrastructure, skills, research and innovation to support their initiative.

The $36 billion National Broadband Network is the most ambitious investment in infrastructure in our history. The NBN is the cornerstone of our Digital Economy Strategy, which will help Australia become a leading global digital economy by 2020.

The NBN will provide the platform for Australian businesses to develop, distribute and benefit from a wide array of digital applications and services. This opportunity will catalyse local development and take-up but also tell the world that Australians will be players in the global digital economy.

Faster broadband will provide benefits to the Australian economy through digital productivity, cloud computing and virtual collaboration.

The Australian Government’s Clean Energy Future plan will encourage the development of low carbon energy generation technologies. The transformation of the energy sector will drive $100 billion in investment in renewable energy electricity generation over the period to 2050.

We’re also investing almost $9 billion per annum in science, research and innovation, representing a 35 per cent increase on the 2007 figures.

In addition to the digital economy and clean energy strategies, the Government has a comprehensive set of support programs for Australian entrepreneurs to innovate and commercialise new technologies.

The new R&D Tax Incentive which delivers a significant increase in support for entrepreneurs; Commercialisation Australia; Enterprise Connect and the current round of the Innovation Investment Fund where the Government will be committing up to $100m of co-investment.

It is hard to predict the future but two things are certain – we’re going to be more connected and going to be doing more with less from a resource perspective. So, instead of pessimism, we should also be celebrating the increased globalisation of our entrepreneurs. The experiences, networks and success that they are having on a global stage are part of this transformation. Our challenge is to remain connected with our own global citizens and use these Australian links to our advantage.

The Australian Government is making a significant investment in the future and laying the policy foundations that will help our entrepreneurs make their mark in global markets.

This post first appeared on the Centre for Innovation and Entrepreneurship CIE Blog.

From the Knowledge@Wharton blog.

Reports about European bank fragility in the so-called “periphery” have picked up. Two weeks ago, Moody’s cut ratings for the deposits and long-term debt of 16 banks in Spain between one and three grades as customers increased withdrawals. In Greece, unsurprisingly, the pattern was even more pronounced – people increasingly were withdrawing their bank deposits. New terms are being coined for the significant level of bank withdrawals – such as a “slow-motion” bank run or a “bank jog.”

It’s an ominous development to those worried about a runaway-train dynamic with Europe’s banks. For all of the thorny problems facing European officials, and for all of the financial instruments and lending programs they continue to deploy to try to solve them, one problem could trumps all others: a market panic in which events move so fast that officials, no matter how well intentioned, simply cannot move fast enough to stop a huge, new financial meltdown that might quickly spread globally.

For now, the relatively slow-moving speed of the withdrawals has kept the anxiety in check. Wharton management professor Mauro Guillen says that, on balance, “my sense is that a run on the banks is very unlikely, except for Greece, where the risk of an exit from the Eurozone remains high.” He adds that his information is based only press reports, however.

Wharton finance professor Franklin Allen, meanwhile, is surprised at how “slow people have been to withdraw money from Greek, Spanish and Italian banks. This is particularly true in Greece. My understanding is that only about a third of deposits have been removed so far,” less than might be expected given the gravity of the situation. “For Greece the likelihood of an exit is generally estimated to be high. Probably people will lose half the value of their money relative to withdrawing now and putting it in a German bank. If people do figure this out … it will be over quite quickly. I don’t think they [officials] will be able to put in place what they need to stop it in time.”

Since there are huge doubts over whether national governments, in Greece or Spain, would have enough resources to overwhelm a full-scale bank run, the question becomes: What is the next line of defence for Europe? Until now officials have tapped various funds to support banks and sovereign debt, such as the European Financial Stability Facility the European Stability Mechanism and the Long-term Refinancing Operation. But much of that money is exhausted. And the European Central Bank (ECB) by treaty cannot be used right now as a bank of last resort.

“Each country has the equivalent of the FDIC,” Guillen notes. “That’s the first line of defence. Governments could also take over a bank if it becomes the target of a bank run. Right now, there is no European-level mechanism.” Guillen thinks that it is increasingly likely “that only eurobonds will eliminate for sure the Greek risk of exit. But we need to wait until the Greek election to see how the situation changes after that.”

Eurobonds, which would spread bailout liability among all eurozone members, are being pushed strongly by France’s new president, Francois Hollande. However, German officials have strongly reiterated their opposition to such common bonds. If ever issued, the bonds would help reduce financial pressure on the countries in the eurozone that are struggling with debt and recession, but would raise borrowing costs for Germany, which can borrow practically for nothing right now.

Germany’s strong opposition was restated despite newfound support for Hollande’s position from the International Monetary Fund and the Organization for Economic Co-operation and Development, two of the top global economic organisations.

“The problem is that these solutions, especially things like fiscal union will take a significant time to implement,” says Allen. ”This is their problem at the moment.” The same is true for eurobonds. “Again, this will take a long time to put in place safeguards in terms of controlling expenditures, even if the Germans were to agree. However, I don’t think they will. They are gradually being sucked in further and further in terms of their exposure.”

Allen added that “we are getting closer to a bad outcome occurring,” says Allen. “Maybe they will save it this time, but before too long something must change drastically if we are to avoid it.”

This post previously appeared in the Knowledge@Wharton today blog: ‘Bank Jogs’ Ratchet up European Risks.

Professor Chris Styles

Mark Zuckerberg has done well. He founded a successful company, made a lot of money, changed how millions of people relate to each other, was the subject of an Academy Award-winning movie, and just got married. Not bad for a 28-year-old.

But there are a few dark clouds on the horizon. The recent float was fraught with problems. Trading was 30 minutes late because of technical problems on the NASDAQ, and the share price has already gone from $US38 down to $US31.

Mr Zuckerberg himself cashed out 30.2 million shares at $US37.58, netting a cool $US1.13 billion. This hasn’t gone unnoticed by his world of followers, and there is the prospect of class action suits from investors because of a question over whether Facebook is growing as fast as originally thought.

Indeed, the US Senate banking committee has launched an inquiry. Investment banking giants Morgan Stanley and Goldman Sachs are also in the firing line.

One of the recent criticisms of the new breed of internet billionaire is an inherent ‘lack of maturity’, and inexperience. Wearing a T-shirt is fine for a Silicon Valley start-up, but does being the CEO of a listed company valued in the billions require a slightly different approach? This highlights two issues. First, when should a company founder step aside and make way for ‘professional managers’?  And does age matter?

On the issue of founder vs professional CEO, we see different models. Bill Gates was at the helm of Microsoft for some time before finally stepping aside. Google took a different approach. Co-founder Larry Page started off as CEO but then handed the reins to 46-year-old Eric Schmidt in 2001. An experienced CEO, Mr Schmidt took charge of the company for 10 years while Larry page focused on building products. Then in 2011, it was back to the future when Mr Page again became CEO.

In the initial years of a start-up, the success of the company is highly dependent on the founder. It is their vision, passion, drive and often technical expertise that investors are buying into. At some point, however, as the company grows, there is the need to implement what seem like mundane things such as processes, systems, governance mechanisms and sound financial management.

Is the founder the right person to oversee this phase? Perhaps not. The smart founder needs to be honest about what they are good at, and what they are not. In their own interests, and the interests of investors, the time may come when it’s right to hand over. But it’s not an easy thing to step away from control of something you created from nothing.

The question of age is really about appropriate experience and ability. Over the past decade we have seen a raft of relatively young CEOs in our part of the world – Alan Joyce became Qantas CEO at 41, Cameron Clyne at NAB was 40, and George Frazis was named CEO of Westpac NZ at 43 (he is now CEO of St George Bank).

There were probably others in line for these positions who were older with more ‘experience’, but coupled with demonstrated ability, it was probably the type of experience they had that got them the jobs. We often see job ads that quantify the length of experience needed. What this probably means is that the company advertising the role doesn’t believe that someone with less miles on the clock would have had the breadth and depth of experience the role requires.

But we need to be careful about assumptions. Someone with 10 years’ experience may merely have lived the same year 10 times, whereas someone half that age may have faced extraordinary situations and done extraordinary things. And some ‘younger’ executives have the capacity to reflect and learn fast – from successes and failures – a key characteristic of a good leader.

The next 6-12 months of the Facebook story and its young CEO will be interesting to watch. Does Mark Zuckerberg have the knowledge, skills and attributes to successfully lead Facebook into its next phase? Or will he take a leaf out of Larry Page’s book, appoint someone with the requisite experience, and serve as an apprentice until he is ready to return to the helm once again?

Whatever the case, the honeymoon for Mr Zuckerberg may well be over.

Professor Chris Styles is Deputy Dean and Director Australian Graduate School of Management (AGSM). This opinion piece first appeared on ABC’s The Drum 28 May 2012.