Growing the entrepreneurial spirit, in Australia and worldwide
Posted on March 28, 2019
3 min read
I’m sure I won’t have a hard time convincing you of the value of entrepreneurialism. This spirit is what drives people to open a new business, to innovate and invent new technology, and invest in those willing to try.
But while we might agree on the incredibly high value of this spirit, we might disagree on the current state of things in Australia and what, if anything, we should do about it.
One of the measures of the future health of our business environment is the quantity and quality of new businesses started each year. On this front, Australia is performing well. When it comes to the rate of technology innovation, though, Australia is not performing nearly as well as it could. According to the 2018 Global Innovation Index, we rank 20th in the world – not a bad result, but we are not as successful as we could be.
What is really interesting is that this report shows we rank 11th in the world when looking at the inputs for innovation – such as the average number of years young people receive formal education, easy access to credit, and a high level of government services being available online – but we rank 31st when looking at outputs like the value of our patents, creation of new goods and services, and our foreign investment outflow.
Clearly something is not working the way it should.
Where were you when the dot-com bubble burst?
It’s almost 20 years since that rise and fall of many companies and the entrepreneurs behind them. While a very small number of people who invested heavily in tech stocks managed to get through that period with their finances intact, the most common outcome was lots of money burned.
Twenty years later the NASDAQ has climbed to all-time highs and is now at over 7,500. Sure the bubble burst, but many technology firms in the US have grown and many new ones have been established. In fact, many of the most successful entrepreneurs of our time were made better by the experience.
For example, Jeff Bezos opened an online bookstore in 1994. It was a disruptive move to take on a saturated market. His often-repeated mantra about being obsessed with providing the best possible customer experience, irrespective of what Amazon was selling and where it was selling it, enabled him to ride out the dot-com bust and build a company that, in 2018, had more than US$232 billion in revenue.
In Australia, the dot com boom gave rise to some serious success stories. REA Group listed on the ASX in December 1999 at $1.11 per share. Today you’d be paying close to $80 per share. Carsales.com was founded in 1997. It listed on the ASX twelve years later and today has a market cap of over $3 billion. And other businesses like Wotif, Lastminute.com, Seek and others have achieved sustainable long-term growth. However, their success has had nowhere near the impact on the Australian economy as technology companies have had in the US.
What lessons did Australia learn from the dot-com boom and bust?
The Australian business community is a conservative one. A relatively small market with abundant natural resources, high barriers to entry, and a huge pool of investors (through superannuation) looking for steady returns incentivises solid, but modest business strategies.
America’s four most valuable companies are Apple, Amazon, Google and Microsoft. Their average age? 35 years. Australia’s four most valuable companies are BHP, CBA, CSL and Westpac. Their average age? 135 years.
While there are a lot of reasons for our conservative business culture, there is no doubt that seeing high-profile failures in the dot-com era took a toll on Aussie entrepreneurs and scared off some established businesses and investors from supporting new ideas, new products and services and new companies.
One of the biggest risks our business community faces is that of complacency. If we do not foster an entrepreneurial spirit and support those who are willing to take on the risks involved, we may miss out on the benefits that only come through a healthy innovation cycle.
Entrepreneurs are an essential part of our economic ecosystem. The products and services they create, the capital that they channel into productive use, and the culture of healthy risk taking help balance the more conservative end of the business spectrum and drive the development of our economy.
Fostering an entrepreneurial spirit
Successful companies, big and small, are those that channel an entrepreneurial spirit to innovate over the long term. Those who do innovate successfully create value. Those who don’t innovate risk fading away.
Fostering an entrepreneurial spirit is a challenge that should be front-of-mind for business leaders, educators, and politicians. We must forge a greater culture of entrepreneurialism in Australia.
The United States is, rightly or wrongly, seen as the home of entrepreneurialism. There is a very long history of innovators and entrepreneurs and they occupy an important place in the national mythology.
In Australia, we have a different history, but we also have many similarities. We have a history of world-leading innovators like Dr Howard Florey, who received a Nobel Prize for his work developing penicillin; Dr Graeme Clark, inventor of the bionic ear; and the CSIRO’s pioneering work on developing Wi-Fi.
We have an excellent tertiary education sector (though we should be realistic that it does not produce as many highly-qualified professionals as it should). And we have more than $2.7 trillion of superannuation, some of which is looking for high returns on investment and is willing to back risks to achieve this.
Australia has the right ingredients for a strong entrepreneurial culture. But frustratingly, we are often better at exporting our entrepreneurialism than fostering it here. Many of our brightest talents continue to take their ideas and their new companies to the US, Israel and Europe rather than growing them here.