Innovate or die

I have been reliably informed by Houses & Holes that we are “all going to die”, and rather sooner than we all imagined. Something to do with the economic meltdown in Europe and America, I believe. While I have no reason to doubt such potent insight — after all, death is the best one way bet available —  I think it could do with a little refining. What is dying is the industrial era in the developed world, a trend that is obscured by the fact that the developing world is industrialising at an accelerating pace. Australia is caught in the middle. It provides the raw materials to rapidly industrialising nations, but is itself entering a post-industrial era. So the nation both is, and is not, in a mess, buffeted by contrary forces.

Over the last 15-20 years we have witnessed many symptoms of this death in developed nations. There was the death of Japanese mercantilism, which began on the dot of the 1990s and has worsened ever since. It is only because Japan is hermetically sealed, owes all its money to itself, that it has not spread further.

The dot.com boom, which was largely about monetising existing forms of commerce or creating transactions from what had previously been non-economic behaviour (social networking, for instance) rose and fell. Then we have had the mother of all death throes in the bizarre financialisation of Western economies, a debt driven exercise in making money out of air or algorithms. The latest iteration is high frequency trading, and, like derivatives such as CDOs and CDSs it, too, shall fail. To think it is alright to make finance into an infinite regress is so irresponsible it can only be because there are no other, normal ways of creating wealth. A death throe, in other words.

The same applies to Europe’s stagnation and hopelessly high unemployment. It is a society that has run out of ideas. Meanwhile, America seems to have only one idea: reward the fabulously wealthy at the expense of the middle class. In other words, fight over the deck chairs as the Titanic dies.

This is why “politics” is starting to assume centre stage in investment analysis. For some reason, governments, which have been demonised as useless for a quarter of a century, are now expected to fix things. They will not, because the problem is about a lack of creating the new, something governments have little or no influence over. About four fifths of so called “new products” are refinements of old products. Tyler Cowan is calling it the “great stagnation“. Yes, there is growth in areas like health care, but that hardly parallels the invention of the car, or fridges or any of the other big changes of the first half of the twentieth century. Most things that are new are just refinements – a mobile phone is just a phone made mobile, a microwave oven is just a quicker oven — or an enablement of something old: the digital revolution is mostly an enabler of existing, non digital forms of commerce or functions.

The most telling sign of death is the loss of a cost of capital in the developed world, which kills investment.  American companies in particular are sitting on piles of cash, but they do not want to invest because they do not see the growth in developed markets (especially as the middle classes are being eviscerated). They can see hope in the emerging markets, but the middle classes are still emerging there.

It all adds up to gloom. Or does it? I do not believe so. Growth, it must be remembered, is transactions, not necessarily consumption of resources (something the Greens, with their Arcadian dreams do not understand). There is no doubt at all that what needs to be the defining characteristic of post-industrial society is a reduction of both the consumption of finite resources and a reduction of pollution. This can, and should, lead to initiatives as profound as the invention of the mass produced automobile or the aeroplane. Which in turn will lead to new growth.

There are many potential technologies; there is no lack of invention. But there is a lack of capital, because capital mostly prefers the industrial and the familiar. Capital is losing all those certainties. The catch is that the changes need to be system wide, and that is where governments will really matter. Given that governments have concentrated on getting elected by creating fear, shifting to showing vision will be an enormous challenge. But in the end, investing in the post-industrial world is the only way to go. As Michael Spence pointed out in the Financial Review this week, what is happening is the end of a cycle that is about a century old:

In the 100-year view of Nobel laureate economist Michael Spence, the current global economic woes are linked to the slow and painful adaptation of the developed world to the growing economic clout of China, India, Brazil and other developing economies.

Spence says it has not yet been fully recognised that the economic malaise is not just a cyclical downturn caused by excess debt, over-consumption, low interest rates and lax regulation, but part of a long-term structural change brought about by globalisation and technology, which are shifting the comparative advantage in a range of industries and services towards the developing world.

Europe, the US and other advanced economies must make long-term reforms to labour markets and boost productivity as well as encourage public and private sector investment in infrastructure, education, skills and training to remove growth constraints. Short-term fixes, such as Europe’s bailout packages and the US Federal Reserve’s promises of low interest rates for longer, can do little more than “kick the can down the road”, he says.

As chairman of the World Bank Commission on Growth and Development since 2006, Spence is uniquely informed on the subject of growth. In his new book The Next Convergence, he judges that it will take until mid-century for developing economies, which represent 60 per cent of the world’s population, to reach advanced status.

Further growth of developing economies could bring about more unemployment in developed economies unless they restructure, he says, citing Germany as a model between 2000 and 2005 when it loosened labour markets, committed to high-value manufacturing and accepted the trade-off between high income and employment. The weakness in global economic and political leadership in the developed world is “a real puzzle”.

In the US “people want things they aren’t prepared to pay for. There’s a fair amount of ideology – maybe people think those are real solutions when they are not”.

In contrast, Spence says, developing countries in general have “evolved a kind of pragmatic, persistent, problem-solving model. They’ve got some reasonable balance between government on the one hand and the private sector on the other”.

But, he says, we’ve entered a “high risk mode”. If the advanced countries can keep growing and avoid another recession, China and the developing world can keep expanding apace.

“But they can’t sustain enough demand to withstand a [US and European] downturn” he says. That would slow everyone, including China, Brazil, India and Australia.

Australia must remember “that natural resource wealth is volatile and impermanent”, Spence says. We should be investing “a fair amount” of the income from natural resources wealth abroad – thus mitigating the effects of the Dutch disease where a high exchange rate hollows out the rest of the economy.

Comments

  1. Brilliant post SoN. Lots of changes needed in Australia and else where, but here you can’t Venture Capital for innovation and it goes to what you say about to the flow of capital to know entities. If we could break the housing fixation, and mining as our only path change might happen. All of the Green innovation will be done outside this country, and the few jobs we’ll get will further dumb down the nation IMO.

    This is a massive issue, but as I’ve said before I don’t see any party with the vision to take this on. We always get half baked solutions and tax. Tax is seen as the way rather than allowing business and governments to really innovate.

    Thanks again.

  2. +1 Fantastic article which hits the spot.

    I think government reform will be a part of this solution too and this article discussing “open source government” shows some of the innovation that could be applied – http://blogs.reuters.com/chrystia-freeland/2011/08/18/the-case-for-open-source-government/

    You can see some of the structural issues with capital investment by looking at ASX IPO’s… 90% are for mining companies, whereas IMO we should be aiming for at least 50% of IPO’s being for new technology / research investment. Sadly, those are few and far between and we risk becoming a nation “dead in the water” when our commodities are no longer required.

  3. As someone who has put a lot of my own capital into innovating, I totally agree with the sentiment of the post and SoN has a great way with words.

    Venture capital is very hard to raise in Australia and the amount allocated by managers of super funds is minuscule which is a travesty which will not maybe, cause this country’s economic slide to continue for quite some time.

    Many Australians believe that buying the over priced air in our houses is a better use of their money than investing in new products or technology. This distortion of our view of risk and investment has been marketed to the deluded masses by the Politco-Housing complex for a generation. Sadly its nor over yet.

    But happily there are a few of us that both don’t believe and put our money where we think it will do the most good. For all those that do, I think you’re super heroes.

    • I don’t think its because people wouldnt be willing to invest. Its simply because the masses aren’t aware of other investments. Half of them aren’t even aware of the opportunities that exist out there. I personally would love to invest in something that will benefit our future. But what will that thing be? Will government kill my investment in genuine innovation again?

      Houses is something very easy to understand and therefore very easy to convince the masses that it is something worth investing in. After all before you invest in something you need to understand it.

      Not to mention government incentives for the average person to invest in property.

  4. The vision to be bold and fearless in seeking truly innovative solutions requires innovative governmental leadership as well as risk capital and entrepreneurs.

    Where, pray tell, is this?

    The petty politic squabbling and over-bureaucratic burden simply guarantees we will do nothing.

    Having just spent seven weeks in France I have concluded that we are massively over-governed by pollies and bureaucrats who selfishly think short term and mostly about personal advancement.

    There’s no chance of a Snowy River project these days!

  5. I was involved in negotiations with our local VCs to fund two startups. It was a very frustrating process. They are typically prepared to fund market expansion rather than development. At the end I just sold one of my inventions and the IT product based on it now sells in Asia. Government funding is scarce and burdened with so much red tape that it’s hardly worth the hassle. A few years ago there was an IT technology incubation program BITS funded by the Federal Government. The whole scheme was run by bureaucrats and their mates. Incubator companies were getting a bit of an office space and advise from people who never ran their own business. It was a complete joke. They spent most of the funds on their flash CBD offices and salaries and the whole thing collapsed at the end.

    I am now using my own funds and time outside my regular job to get another thing off the ground but it’s quite a painful process and requires a lot of determination.

    Our governments waste a lot of money on brain dead projects without any hope for any long term economic return at the time when we badly need to reinvent our productive industries other than mining.

    • I’ve been trying to do the same JPK with a green building product. Without going into it because I’m trying to patent it, I’ve tried to get CSIRO assistance on the test side, but they are governed by strict guidelines in the field I’m working on. The people at the CSIRO are brilliant in all my dealings with them and I can’t praise them enough, but I’m on my own is the final outcome.

    • Ditto.

      Spent the past year trying to raise funds from local VCs. A killer idea IMNSHO, but couldn’t get anyone interested.

      Now Google Labs has popped up with the exact same product, and Google isn’t known for putting money into dud ideas (well, not many anyway)

      So I’ve thrown my hands up in the air and given up. Its bloody hard to compete with Google especially when US software engineers get cheaper all the time, and Australian engineers get more expensive.

      H&H has my email address if anyone wants to discuss their stories offline.

      • The system is designed so really only large companies can really benefit in the intellectual economy. For example the cost of patents is very high for an inventor to protect his idea. However for a large company it is pocket change.

        For every invention stolen by a large company there’s probably 10 out there that never see the light of day after the inventor realises that as a small player there’s no way he can make money of it because patent or legal protection is too expensive.

        What happened to the old days where the best innovations and inventions came from someones garage?

    • I really don’t think the government should be in control of any VC programs. The bureaucracies themselves has absolutely no understanding of any part of the VC->commercialisation chain.

      The governments inability to provide these types of services is something I have talked about previously

      http://www.macrobusiness.com.au/2011/03/the-economics-of-government-service-failure/

      I do however think that the government could easily support innovation through the tax system. This is something the Japanese government does.

      http://www.macrobusiness.com.au/2010/05/asimo-and-the-oz-mining-tax/

      It basically allows companies to offset research and development against company taxes.

      I am having lunch with a professor from Yokohama Uni tomorrow I will see if I can get some info on the finer details on that system.

      In regards to gathering VC, I actually think communities like MacroBusiness are something that would be able to facilitate that. I am sure there are many readers who would be happy to support a great idea given that they are currently sitting on a mountain of cash and gold 🙂

      Maybe this is something we could think about in the future. I would personally love to see some more innovation in this country and would happily put some dollars behind a great idea, I am sure others would as well.

      • We used to have 150% R&D tax deductions but this doesn’t solve the problem of taking a fresh idea off the ground by individuals that do not have sufficient capital.

        I agree that the Government should not be running any R&D supporting services especially that I have seen how they do it in real life. They could however designate funds and hire private VC companies to manage them. Even if a fraction of what they wasted on pink bats and similar non-sense had been spent on R&D and implementing new ideas there would have been at least a reasonable chance of creating some new ongoing business.

      • what about my Research bonds idea?

        Here’s my stage two (i.e a bit better) version:

        I propose that the Federal Government facilitate “Research Bonds” that have the following features:
        • initial capital supplied by Australian investors (targeted to superannuants (including SMSF and big retail/industry funds) and savers)
        • the annual coupon is the prevailing 10 year Federal government bond (currently approx. 5.5%)
        • the annual coupon is guaranteed and paid by the Federal Government to the investor (i.e is not the responsibility of the recipient of the research bond)
        • the annual coupon is tax free with no means testing (which means the real rate of return exceeds that of a term deposit at a bank)
        • the minimum term is 10 years
        • a market is created for buyers (authorised institutions e.g. CSIRO, university/corporate R&D departments, private equity) to be matched to sellers (the investors), with a PDS style compliance system overseen by ASIC. Different tranches would have different premium/discount to par value, based on the underlying bond, which means differing yields (but the guaranteed minimum yield is the 10 year govt bond)
        • any project that leads to a commercial venture for development converts the bond into equity, with the Fed Govt receiving up to 10% of any equity proceeds
        • bonds that are converted to equity are then later sold are not subject to capital gains tax
        • at maturity, the bond converts into a standard 10 year Federal government bond (which can then be traded on the market for a capital return)

      • Hi Prince

        this is a great idea, have you floated this idea with someone like Macquarie etc or a political party ?

      • Do you mind if I mentioned this idea to a few academics and a minor political party. I was thinking even sending it to my local MP but she wouldn’t understand it. If it takes off I will ensure you get the credit.

      • Go for it.

        I haven’t patented it or protected the idea, i think that’s anti-intellectual, even though the millionaire factory could make a bit of dosh financial engineering it.

        Anything that takes capital and debt away from unproductive areas of the economy (housing and speculation in shares) and puts it into value-adding prosperity is a good thing for mind…

  6. In politics as in business, decisions are usually about risk/reward management in a context where resources are limited and therefore have to be rationed.

    These days, decision-making is favouring protection of the status-quo. That is, at a time of historic change and new complexities, when we need creative thinking and innovative solutions to our many problems, we see the opposite. In economic terms, businesses and households have shifted their modes of behaviour from reward-maximizing to risk-minimizing.

    The same is occurring in politics, too. The politics of “doing-less” – or, in some places, of “doing-nothing” – is winning. In Australia, the Opposition has gained an election-winning lead in the polls by tapping into this conservative ethos and (the will regret it one day) by engendering fear.

    Politics has now become a game of “interest-protection” and has ceased to be a game of “social-and-personal-expansion”. It is conservative politics of a more stupid variety.

    This is a pity, because we really need inventive, adaptive, pro-active policies that build resilience and open the oath to future prosperity. We are obviously not going to get them.

    Once upon a time, I worked with the chronically-unemployed, trying to help them regain lost confidence and, ultimately, gain skills and place them in work. It could be a demoralizing business, not least because of the intense risk-aversion of the people involved.

    It used to get down to this sort of situation: when you’re down to you last bus-fare for the fortnight, what are the chances you will spend it to attend a job interview when experience has already convinced you that you will not get the job?

    If you have to choose, it is agony. If you spend the few pennies involved, you really are broke. If you don’t, you have just told yourself you are a worthless piece of crap who should not expect to have a job and a normal life.

    So people who have very little – or who fear they are going to lose what they have – become introverted, incapacitated and risk-averse. Optimism goes out the door and with it the opportunity for renewal.

    This is the self-reinforcing spiral of defeat and dejection that lies at the end of economic destruction. Those who understand this should fight with all we have to prevent it.

  7. Clean tech is an area of potential innovation. Sure electricity from low-emissions technology is just a refinement of an existing product, but it is still innovative, and could contribute to economic growth. It might be pie-in-the-sky, but if we could use Australia’s environment to produce vast amounts of cheap energy, then surely economic growth would pick up. There are plenty of possibilities:

    – solar
    – solar thermal
    – geothermal
    – wind
    – wave
    – nuclear

    All have their problems, but there is real potential for change.

    • I read that the last Australian true PV manufacturer went into administration about a week ago, and likewise the wind power companies had the same fate from what I was told by ATA a few weeks ago.

      SunTech the world’s biggest PV company Dr Sui trained at UNSW. Australia gets some benefit from this, but more needs to be done to keep industry here.

      I’ve worked all over the world in the last 14 years as an engineer and found lots of Aussies doing great scientific and engineering work that just can’t happen here due to the our lack of financial support in other than a few sectors. Science and engineering in not valued in this country period.

      http://www.unsw.edu.au/news/pad/articles/2007/jun/Suntech_sponsor.html

      Totally agree with your post however.

      • Clean tech is the best hope for Western industrial economies — I have no doubt.

        Its an area where innovation is desperately needed, and the West has the culture and brain power to deliver. Sadly, the whole field has been hijacked by the denial-o-sphere and there is now huge political resistance to anything related to climate change, especially in North America and Australia.

        Australia has awesome potential to develop geothermal and solar technologies, but it will never happen in a country that derives billions of dollars in export income from coal. We are the ultimate coal junkies, both domestically and internationally. Its hardly in Australia’s economic interests to reduce the world’s dependence on coal. Do you see the Saudis work on alternatives to oil?!

        I’d love to see the Europeans invent some amazing new clean energy source, license it to the Asians for low-cost production, and then see demand collapse for our stinking coal. Frankly, we’d deserve it. After decades of sitting on our arses getting ever richer by exporting dirty fossil fuels to the world it would be the ultimate comeuppance for the ‘Lucky Country’.

      • Lorax,

        You’d better not read the “Weekend Australian” today – not without your blood pressure medication handy 🙂

      • I don’t even read Mx – the free Murdoch press mag they hand out to rail commuters.
        .
        Free poison is still poison.

      • The Australian is this country’s premier broadsheet.

        The Australian is little better than Fox News in print. Some of the business and economics reporters are ok (Uren, Stutchbury) but the political coverage is appallingly biased.

      • Political coverage is excellent as I suspect you secretly concur – have notice you mention several times now that you watch Agenda (so do I) – this show is better than Insiders and manned by a couple of key writers from The Australian…

        As an aside – Let’s hope all media press for sacking and by-election in Dobell.

      • Have you seen the latest work done by China on Thorium Nuclear? … that could be the nail in the coffin for current fossil fuels. There’s also a small movement to pickup research in the US where it was “stalled” in the 60’s by govt.

      • Adrian, the last manufacturer of PV cells did not go in to administration, they simply decided to close their PV plant and import the cells from China to feed their panel plant…Another 30 jobs gone so far and I’m sure the decision to close the lot and import the fully assembled panels is only a matter of months away.

        Great technology developed originally at the University of Sydney and it is now a dead end industry here in Australia.

  8. What you are asking for SON will not happen in our lifetimes. Everybody’s focus is on more control, particularly governments but also in the Sciences. Even the most positive post above is all about money and making it. People all over the world have been converted to drones for the great god “making money”. IMO until we realise that is only one part of being human we are caught in a downward spiral ending in war.
    However, when collectively we as a society re discover the true value of
    Excellence
    Craftsmanship
    Curiosity
    Wounder
    Hope
    Then a new renaissance will emerge. Unfortunately I can only foresee more dark time ahead.

    Ps There are many new inventions, its all at the micro level (Nano particles and genetics) and only funded for pet political processes (defence, climate change and human biology) that are part of the chains on human creativity.

    • You are right, Learner, but most of the people just don’t get it. They believe the humanity can continue to make material wealth infinitely although we are living on a very small and with exhaustible resources globe. Unfortunately when those people on the top realize they can’t make as much money as they are addicted to, then the war is their choice, as usual.

    • Learner, if you stop looking for solutions, you certainly won’t find them.

      You suggest re-discovery of Hope, Curiosity, etc.. Once, I got hooked into teaching a Trade in a Community College in a poor city in the US. As a Community College, they had to take anyone and everyone who enrolled – no pre-qualification. The class was a real mixed bag – the odd alcoholic, Latino’s with limited English, some could barely read, all down on their luck. Many dropped out, but after a year, they were “getting it”. The shift in their outlook was a real blast – “Man, I can DO this”.

      I think the qualities you think are gone are inherent in most people. All you have to do is bring them out.

      Lets’ not give up.

  9. SoN,

    First up let me say I always enjoy your big picture thinking posts just slightly peppered with a ‘rage against the machine’ vibe.

    But I am bit perplexed by this one – its just a bit too sweeping in its generalisations for my liking.

    Innovation Definition
    I am not convinced about this concept that the west has run out of ideas and that all recent innovations are just refinements on past ‘great’ inventions. I think this is largely semantics – even the ‘great’ inventions are just a refinement of something prior that addressed a fundamental ‘need’. It is necessity that is one of the biggest drivers of innovation (I will get to funding latter). Really, the automobile was just a better version of the horse and cart. It was invented because taking 5 days to get 400km sucked. Air travel is just a visually impressive refinement of ship travel.

    One of the reasons why the rate of innovation ‘may’ have slowed is because the very annoying or inconvenient things in our lives have now largely been solved. So with air travel it takes 8 hrs to get to Tokyo, when planes get faster it might take 6 hrs but who wants to pays that much extra for 2 hrs to drive that next innovation?, whereas cutting weeks of the journey was a sure investment bet.

    Having said that I am not convinced that we have run out of ideas – what about solar power, making energy from harnessing the sun’s rays delivered free to planet earth or wind power or wave power – their pretty impressive ideas.

    West vs the Emerging Economies
    I think the contrast between the dying west and the ‘irrefutable’ rise of the emerging economies is a little over done. Of course they are going to have higher growth they are coming of a lower base, they have the low hanging fruit. But they are hardly at the forefront of innovation themselves. Brazil like Australia is getting a massive benefit from a traditional third world industry (digging rocks out the ground) and China is heavily dependent on its cheap wages to act as a production base for western companies and needs to keep exporting to the west.

    Lots of the gadgets and recent innovations were conceived in the US or Japan and those companies ‘innovatively’ structured their production in China.

    Funding
    Now having said all that, funding is definitely an issue. I blame the regulatory framework and government policy (or lack of it). As you rightly indicate, when you can make such ‘easy money’ from lending money to people to buy houses off each other or bid up liquid asset and commodity markets, there is hardly any incentive to invest in the illiquid, long gestation and high risk seed capital sectors. In addition the so called “private equity’ sector hasn’t done true innovation any favours recently. Not every firm, but a lot of the PE investment houses returns in the last few years of the boom were just delivered through massive leverage – rather than good underlying businesses. Now lots of those investments have blown up and burnt the fingers of the super funds, which obviously wont entice them to increase their allocations.

    • Adam,

      Some excellent observations.

      I would add that it seems that we are prepared to spend more time and money these days developing products and services that “feel good” rather than those that “do good”.

      We seem to be focussed on making the lives of the current population more entertaining, than on making the lives of those yet to come more productive and sustainable. I guess this reflects the “me” nature of our society these days.It also makes for selling a lot more widgets in the now.

      There are plenty of “ideas” around in the areas you suggest, and many more needed in energy, the environment, transport, earth and medical sciences, and the overall sustainability of an increasing population. But the fruition of such ideas does not necessariuly result in an instantly marketable gadget that has mass-market appeal.

      So, later…..maybe.

      • Thanks Julius,

        I agree that a big chunk of recent innovation (at least that which touches Joe Blogs on the street) is the gadget side of things.

        As i mentioned above, I think that is because the innovations around the really crappy chores of daily life have already been solved. Back in the early 1900 when the housewife was bashing the clothes against the washboard, i am sure she would have said “there has to be a better way than this”. How often do you reckon people say that now about technology? (of course everybody says it about administration and organisation related things like public transport etc).

        Having said that, the last 20 years have still been pretty innovative IMO: i mean we are communicating right now on this awesome blog through the internet on computers – they weren’t doing that 20 years ago.

        I think with the pain and economic turmoil we are going to go through over the next few years, this may be conducive to a new wave of ideas generation. Whether any of them can get funded to commercialisation is another story and will depend on government policy etc.

        Perhaps the next wave of innovation in the west will not be so product focused but about how to organise things better like town planning, public transport etc

  10. Adam L, Some fair criticisms. I am looking over a very long period and so am liable to be a bit overly general. Innovation is a horrible word, really. But I would correct a few points. I am not saying we have run out of ideas, far from it. Nor do I think the developing world has lots of ideas, they largely imitate what has already happened. The key difference is that we now have so much control over our natural environment, the invention/new technology has to be turned towards changing our way of living so we do not harm ourselves. Technology for the anthropocene, as the label goes. That is very definitely new, and it has to be where we head. And capital eventually has to follow. The ideas are there to remake our systems, the will is not.

    • Hi SoN, I just discussed some of this above with my reply to Julius. Yes I agree that the next wave of innovation should be on structuring better societies.

      Unfortunately the modern political order is a absolute joke, except its not funny. We are wasting so many opportunities and further cementing a lot of our structural issues. However, whats amazing is how good Australia is despite decades of almost criminal negligence on part of our politicians, so you can only imagine how good it could be if we could get our act together.

      But as the saying goes “necessity is the mater of all invention” and quite frankly western people (especially Australians) just aren’t desperate enough yet to drive the change that is required.

      I think the economic environment over the next few year is going to be pretty horrible but i think if anything good will come out of it, it will be a big push for structural and regulatory change, which hopefully can give a boost to innovation and its funding. A bit of schumpeter creative destruction.

  11. SoN this is such an important topic I think it would be worth while to raise the profile so we can do more about it as DE is suggesting above.

    Australia has a whole range of scientific (call them focus groups), but does anything ever come from them? I don’t know, but what I do know is that Australians are innovative, and given we can’t rely on government maybe something can be done outside government and all the traditional methods.

    We have lots of wealthy miners currently and they might be willing to get involved.

    Comments?

  12. SoN, thanks for spotlighting a critical area.

    I watched Spence’s talk on Convergence to the Press Club last Wednesday, then listened to Lowy’s Thirwell on the same subject on Thursday.

    It seems to me that the problem is far more immediate than either you, Spence or Thirwell have presented it. Aus is loosing its manufacturing base, and we know that China will stop buying our minerals as soon as she can.

    With unfettered Globalisation, the work of any Aussie is worth no more than the lowest-paid Asian worker who could do the same job.

    That is our present reality, our immediate and pressing challenge, like it or not.

    Dani Rodrik thinks nations should take care to preserve their manufacturing base – see http://www.project-syndicate.org/commentary/rodrik60/English – whereas your thrust is innovation into a post-manufacturing economy.

    Aus has always been a lousy environment for innovation, except in the biosciences. But I think we can do quality manufacturing – look at what Assa Abloy did with Lockwood – with good management.

    This topic is too important to go picking winners. I think we have to pursue all avenues that offer a way to meet the challenge.

  13. Occasionally, when I’m daydreaming, I imagine a world where the entire human population of the planet is peaceful, smaller, healthy, long lived, well educated, intelligent, and living in harmony with this beautiful blue orb. In my dream we regularly travel throughout the cosmos as explorers, gathering and disseminating knowledge, not interested in domination or exploitation, and sometimes seeding suitable planets with life….simply because we know how to.
    Could this be a possible future?….yes, I believe so, and we are closer to the technology needed for all that now than we have ever been. But we still have to crack the true nature of matter and energy….and then shake off our chimpanzee past which still shapes so much of our behavior to each other.
    Here’s hoping…

  14. I always understood that the biggest US industry was War.

    I would have thought that the direction to go in next would be the refresh of all existing technology to be greener and then focus on Space…

  15. Interesting stuff. I can’t help visualising the economy as a ‘dynamic system’ with three required inputs; energy, materials and information.
    The first two are restricted and peaking, but the third, information is not.
    There is no reason to dispair as long as the mix is not intrinsically fixed.
    In essence we have to work smarter, use the third element of the mix to get increasingly more from the first two elements.

  16. History has shown again and again the system – and certainly the ruling class – does not change unless and until they have to. Until the titanic is half under water to borrow the metaphor. But there are some very interesting examples and models of systemic reform if you go back far enough, for example Solon in Ancient Greece. This was a time when democracy itself was being innovated. We are not so clever as to have nothing to learn from them.