Where WA’s future will stem from

The rise and fall of once dominant people, companies and economies is common place. These days, if you think of the most amazingly successful, be wondering how well placed they will be a decade from now.

10 years ago, the top website in the world was MySpace. It was the first social media darling, quickly to be overtaken by Facebook. Who uses it now?

For the first time ever last year, the top 5 companies in the world, by market value, were all tech companies: Apple, Google, Amazon, Facebook and Microsoft. 2 of them were formed in the 1970s, 2 in the 1990s and one in the 2000s. They all stem from the US.

Four of these five companies dominate our landscape here in Western Australia – even though we are about as far away from their headquarters as you can be…

  • Apple devices are everywhere. We have 2 iPhones and 2 iPads in our household alone. (10 years ago, these devices did not exist.) We purchase nearly all of our music through iTunes.
  • Google is ever present. It’s how we search for anything, and 2 of the other smart devices in our household have Google-operated platforms.
  • Facebook is all pervasive for the parents in the household, while the children are on Snapchat, Instagram and Youtube. The last 2 of these are owned by Facebook and Google respectively.
  • We have 3 Microsoft  PCs in the house running Microsoft software and operating systems.
  • Only Amazon is not (yet) a dominant player. Amazon online retailing is coming to Australia this year, and it could also become a force to be reckoned with in our house. In the US, 50% of all online commerce goes through Amazon. I have a feeling they will make a huge impact here, maybe not immediately, but do check back in 3 to 5 years.

Which gets me to thinking about my teenage children, the environment they are growing up in and the world of work they will shortly enter. If the rise and fall of organisations teaches us anything, it’s that the businesses that cannot sustain relevance fade away, and the wildly successful dominant players better be re-imagining their future before the rug is taken out from under them. Reinvention is the key, keeping on top of the trend and perhaps getting in front (if possible) is crucial to survival.

Western Australia has an economy almost like no other. It has a massively successful resources industry, which grew to three times its size over the 2002-2012 period. It’s still growing, but is in another phase now (production, rather than building). So much income is earned from it, and from our State, almost half of the country’s entire export income comes from WA (even though we represent just over 10% of the population). The resources industry is not going away!

If I liken the WA economy to a major organisation, then during the very strong years (the decade from 2002), it was time to make hay while the sun shone (yes, we did that) while also looking out for the next success story before the end of the current one (err….).

It’s easy to look back in hindsight to the one trick pony mentality of the 2000s. Here in 2017, we are where we are. So what now?

One thing is clear: we need a diverse economy, in every sense of the word. Not only do we need to draw on the rich and full resource of all working people, at the managerial, C-suite and board level, we need to develop our other industries to take up the slack. Tourism, health, technology, agriculture, aquaculture, education … these are areas of great potential. The trouble with many of them is that every city or region in the world could claim to have some prowess here, or aim to be a world leader. In only agri/aqua-culture could we claim to have some innate natural advantage.

If we’re to lead in tourism, then we need to have a reason for the Asian and global tourist to visit our State, and to return. In health and technology and education, we need investment and smarts and hyper-intelligent people to be drawn to live, work and stay here (including our brightest).

There’s one thing we could do that would be a true investment for the local economy; one thing that could make a significant difference long term, and might save us as a State. It’s not a hopeful, wishful thing, it’s an absolute necessity if we are to continue to enjoy our great lifestyle.

The answer is a meaningful and rigorous devotion to world class STEM (science, technology, engineering and maths) education for our children – from primary school all the way through to university (and then beyond, through continuous education). We have to commit ourselves to extracting maximum value from the best resource of all – our brains, well, the brains of our children. As you and I are not the future of the economy, yet our school children are, then it’s to them (and their education) we must turn.

It’s a sad fact that the numbers of children taking STEM subjects in our schools has been dropping, and the quality of STEM teachers is also moving in the wrong direction.

The average number of science subjects taken by Year 12 WA students declined from 1.41 to 0.66 between 1986 and 2012. (Report: Optimising STEM Education in WA Schools, TEAC/ECU, 2012). The average number of maths subjects taken declined from 0.92 to 0.69 between 1992 and 2012. There is also a lack of STEM qualified teachers (too often teachers are teaching out of their training area just to get someone in front of a class), and we don’t even have a database of what qualifications STEM teachers currently have. If you don’t measure the problem, you can’t manage it.

Just think about this. The average year 12 student does not even take a maths or a science subject. In other countries, such as one of our closest neighbours Singapore, where I taught for 7 years back in the 1990s, students record among the best results in maths and science globally. There is serious investment in education by the government, and a drive (by students and parents) to get the best results. It’s embedded in the culture, and in many ways Singapore, with few natural resources to speak of,  has had to invest in its people to survive, and thrive.

It’s always been the case that economic growth derives from investments in education, science and technology. Which brings us back to where we came in. If the 5 richest firms are all US-based, and are deriving more and more income here, paying little tax, and employing few people relative to that income, where are the Aussie and West Aussie firms coming from, who will employ our children in 5, 10 or 15 years time? What jobs will be there waiting for the 20-somethings of the 2020s and 2030s? If the STEM skills are the ones future employers will require, are we going to get serious about STEM education?

We all have a role here, not just government. More of our bright young things should teach, at least during their 20s. More of them should take STEM subjects, not because they’re easy and may improve an ATAR score (they’ll likely not), but because they’re important. Especially girls. We need diversity all the way through our businesses, right to the top and across all industries.

Parents, colleagues, managers, employers – I’m talking to you.

~~

More reading on STEM:

Transforming STEM teaching in primary schools, Prinsley & Johnson, Dec 2015

Optimising STEM education in WA, TIAC, ECU, 2013

Image Credit: Lorenzo G Alarcon Elementary

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Post Truth or Expensive Truth?

Do facts matter anymore?

The person who would go on to win the 2016 US Presidential election made statements that were true (or mostly true) only 15% of the time over the election cycle. His opponent’s statements were true or mostly true 55% of the time. Fake news was shared more than correct news. Last year, the Oxford Dictionary made “post truth” its word of the year.

Yet this phenomenon is not new. At a recent UWA lecture by Stephan Lewandowsky provided analysis that showed how Fox News (in 2010) misinformed twice as much as other news outlets (running stories on Obama not being born in the US). Even earlier, in 2006, Republican supporters in the US believed there were weapons of mass destruction found in Iraq, even after a report conclusively found (in 2004) that no such things were ever there, or found.

Post truth politics work, it would seem.

Two thirds of white males voted for the current US President, and he actually did better than his opponent in the mid-income range. The poorest actually voted for Clinton.

Despite all the lies and half truths, on both sides, supporters of each candidate believed their person was telling the truth 94% of the time. Research has shown that preconceived support is the largest determinant of whether you believe a proposition or not.

In other words, it’s become tribal. Even if supporters are shown that their candidate has told a lie, they accept this, and it does not change their support.

We like to hear good news – it’s only natural. We prefer to hear information that marries with our view of the world. Facts that differ with our own values and inner held beliefs are uncomfortable, and on the whole, we prefer not to be uncomfortable. We’re wired that way. When your team is being belted in the game, you might switch off in disgust, or start walking down the aisles to beat the traffic home. Why prolong the agony?

And then along comes social media, and we can gather whatever information we want. We can live in a cocoon of information that pleases us, whether it is true, biassed or just plain made up. In fact, Google and Facebook’s algorithm’s serve it up to us, because they know what we prefer. They know what we will pause and comment on, click and share.

Now, I’m not blaming the media, or social media, or tribalism, or how we are wired … it is what it is. However, we need to recognise this, if we are to deal with it. Because if not, then we are moving into a world where facts don’t matter, and that’s dangerous.

The trouble is that opinions are cheap and facts are expensive. Worldwide, media is trying to find a business model that will pay for facts, now that the former business model (classified and display advertising) has moved online. Some media don’t care as much as they used to about facts, and peddle opinions, or just promotions.

Yes, media should have seen it coming, but that’s easy to say in hindsight, and what move should they have made anyway? Were they always going to be bowled over?

True, truth is in the eye of the beholder, but we have seen instances (at the highest level) of just plain faced lies (proven lies) being waved off and ignored, as if at least trying to say things as they are is in itself unimportant.  It’s not how things are anymore (people don’t want that), it’s how they make you feel.

I don’t know what the answer is, but I’m out there looking… answers on a postcard please.

A watershed moment for Perth tech startups

Dr Marcus Tan addressing the ‘Digital Disruption in Health’ YOLK event, last week

This week it was revealed that local tech business, HealthEngine, had raised $26 million from global venture capitalist Sequoia Capital.

This is notable for a few reasons:

  • it’s the largest private sector investment in a local tech startup
  • the first such investment from this Silicon Valley VC in Western Australia, and their second in Australia (after investing in Melbourne-originated LIFX)
  • the same VC that has invested in such global successes as Google, Apple, Whatsapp, Stripe and AirBnB
  • the business is headquartered and will remain (as far as we know) in Perth
  • the investment reduces the need for the company to do an IPO & keeps the business private

On so many levels, this is a knock-it-out-of-the-park deal, made all the the more notable in that the co-founder and CEO, Marcus Tan, has been a fixture on the local startup scene for 7 years or so.

I remember first meeting Marcus when he was a fellow mentor on Perth’s first Startup Weekend in September 2012. The 10th such event will be held next month. The more I got to know Marcus, the more impressed I was.

Not only a cofounder and CEO (he’d put together the HealthEngine startup in 2006, developing it from his lounge room), he was also an angel investor himself, and a philanthropist (being behind the Global Meridian fund raiser for local worthy causes). He was one of those who set up Perth’s second co-working space for techies, Sync Labs (now run by Spacecubed). He has been basically everywhere in and around the sector in the past decade, as well as a practising GP. Is there nothing he can’t do?

A week last Friday I moderated a session down at the Old Swan Brewery (see photo above), on the topic of digital disruption in health, and he was quite brilliant on the panel. His deep intelligence and soft spoken authority came across (as always), and anyone that met him and heard him cannot but be impressed.

A few years ago I invited him to be a guest speaker in my eBusiness MBA class. Along with many gems of advice, I remember him saying that that Australia is of a certain size that one online business can totally dominate a sector. Realestate.com.au (REA Group) has done this in real estate, and is one of the most profitable online real estate businesses globally. A larger country, such as the States, he argued, is almost too large to have one business dominate. It was clear he was out to dominate Australia, and this week’s funding probably allows him to complete that mission, while looking out for regional and global market expansions.

It could not happen to a better person, and I wish him and HealthEngine all the best.

What this also does is demonstrate to other local tech startup aspirants that a good tech idea, well executed, can be built from Perth. Apart from traditional ICT businesses like Amcom and iiNet, we’ve not seen evidence of this being done. You can also bet Sequoia and others will be looking at Australia, and maybe even Perth. To Atlassian and Canva (Perth originated, but now Sydney based), HealthEngine is now added as the next possible Aussie ‘unicorn’.

Be inspired Perth tech startups up, for you could join the list sometime soon…

It’s blockchain, stupid

dilbert-chain

7 years ago I visited a New York real estate technology conference, and one of the main themes was the emergence of the mobile economy, and how important smartphones were becoming. On returning, I wrote one of my first blog posts (‘It’s mobile, stoopid‘) on the Business2 website, the first comment of which still reads: “I don’t think so…”

3 years earlier, Apple’s iPhone had heralded the onset of the smartphone era, and business was never going to be the same again.

Wind on to today, the smartphone is everywhere. This device has changed how we communicate, receive information and news, take photos, and how elections, products and almost everything is determined. Half the world wide web traffic is now over a mobile device. We’ve got access to all the world’s information, anywhere, anytime.

Back in January 2010, we did not even have the iPad, Samsung or Android phones. Many of us were not yet on Twitter. Instagram (established in October that year) and Snapchat (2011) did not exist.

Snapchat went public last week, and by the end of its first day of trading, was valued at US$33 billion.

Just take a moment to think about that.

An app, mainly used by kids to send quick greetings and filtered photos of themselves to each other, with hundreds of millions of dollars of losses, is worth more than all but 8 of the 2,000 publicly listed companies on the Australian stock exchange.

Snapchat, who famously refused a US$3 billion offer from Facebook in late 2013, is worth more than Woodside, Woolworths, Macquarie Group, QBE, Coca Cola Amatil, the REA Group… way more.

Snapchat, something dreamed up around 5 years ago. And it only ‘exists’ on a smartphone. Such is the power of the mobile/smartphone platform.

And so we turn to 2017, and as we move inexorably to the end of the current decade (less than 3 years now til 2020!), what will be the next big thing?

Some are tipping the Blockchain.

A whole world of mystery surrounds the blockchain. It is not easy to describe, or explain, and even its inventor is a mysterious Japanese person (persons?), who was (were?) rumoured to be living near Esperance.

You may have heard of Bitcoin, the online currency built off the blockchain platform, itself something invented only recently, after the GFC in 2008. But the blockchain (like the world wide web itself) can spawn many applications beyond bitcoin.

Simply put, the blockchain is a secure online ledger, providing permanent asset transaction summaries. Each asset, and each transaction (buying or selling) has its own ‘block’ linked together in ‘chains’, hence the blockchain – a line or even matrix of blocks chained together.

The key point to remember is that each unique block (a time stamped record) cannot be altered, ever. This is because this record is sent out to all the millions of computers around the world that are linked to the blockchain. Once sent out, it cannot be altered. It’s a permanent record.

The implications of this are that any asset transaction (such as transferring money or property or a contract or a share) can be uniquely recorded, and be immutable, irrefutable, unchangeable. This process can also happen quicker, and cheaper, than using a traditional intermediary.

So, potentially whole rafts of intermediaries (such as banks, real estate agents, any middle person really) can be disrupted away by the blockchain. The blockchain gives confidence to those involved in transactions (buyers and sellers) in the same way any broker or middle person might have done so up to now.

The reason the blockchain is so strong, and unhackable, is that as it is made up of individual blocks, that exist on millions of computers, simultaneously. In many ways, it has characteristics of the world wide web itself. Interspersed, with no single person in control. Anyone trying to change anything would have to have control of all those computers with access to a blockchain, and all blocks, at any one time. This is deemed impossible, and gives the blockchain its inherent power.

Once people start to recognise the simplicity and strength of the blockchain concept, they will start to trust it, and use it, to transact. Once this happens, banking, real estate, contracts, voting, stock trading, car exchanging and almost every market which involves ‘assets changing hands’ (which is what markets essentially do) could be disrupted and changed forever.

So, the blockchain could be the next biggest invention since the world wide web itself.

For hundreds of years we’ve had intermediaries help us with most of our transactions, as it’s too hard to run around and meet everyone in the market, and do it all ourselves. If the blockchain can do this for you, who now needs these intermediaries?

Yes, this may seem far fetched, but then again an app that makes funny filters for kids is now worth US$33 billion, and counting. 10 years ago, the devices on which it sits did not exist.

Remember also that Apple, almost bankrupt 20 years ago when Steve Jobs returned to the helm in 1997, is today the most valuable company in the world, at US$617 billion. Google, which did not even exist in 1997, is worth US$532 billion, and is the second. Rounding off the top 3 is another tech giant, Microsoft, at US$483 billion.

All these companies, and millions more, rely on the world wide web for their existence, something that did not exist until 1990. With the blockchain now out in the cybersphere, what else will be changed in the next 10 and 20 years? Perhaps pretty much everything.

~~

If you want to know more about the Blockchain (I’d strongly advise it), watch this 18 minute TED Talk by Don Tapscott.

Angels, 5 reasons you should invest in tech startups

Send me an angel right now
When we set up our tech startup back in 1999, we looked to angel investment to get our business off the ground.
Some new business ideas just need to be tried in the marketplace in order to see if they will work, and they cannot be launched without some financial support. Often the idea is so new and disruptive that it will take time to educate a new market in new ways, and allow the fledgling business to take hold.
It is about the riskiest investment you can make as an investor. It is not for your nest egg, and the most likely outcome is you will never see that money again. In fact, the odds are (even if you carefully sift through your potential investments, saying no to far more than you say yes to) that 7 or 8 out of every 10 will fail, 1 or 2 you may see your money back, and 1 in 10 may return a lot.
That’s the deal.
I remember telling our angel investors (high net worth individuals and others who had a punt on us) that they would most likely not see a return at all. We wrote a chapter in our business plan outlining all the things that could go wrong, and how they would not see their money again. We wanted them to be awake to this reality, and not treat us like a bank. They could not ring us up in a few months and ask for the money back. The money, by then, was gone. It was used to set up the website, database, consultants, software, computers, the office, pay rent and the first few months of staff costs.
By the time we’d launched 65% of our money raised was already spent. We had barely 5 months of money left to last. We had to immediately raise still more, which is what we did. It took 7 years before those initial investors received an option to sell.
This is the reality of the tech startup. If you are interested in being an angel investor, then you need to understand that this is possibly the riskiest investment you can make. It is only a part of your portfolio of investments, a small part, perhaps 2-5%.
Say you are quite well off and have $1 million to invest. You might put some in blue chip shares, more in a property syndicate, high return deposit or a managed fund. Perhaps $20,000 to $50,000 in a tech startup. If you have a few million, then you could afford to do a $20,000 to $50,000 investment every year for a few years. You might look at several opportunities before deciding to have a punt.
If this is you, then I have 5 reasons why you might be persuaded to have a go. I have no idea which startups will make money – if I did, I would be out farming cupcakes from unicorns.
However, as someone who’s been there and done it in startupland, may I be so bold as to venture the following:
  1. Low rate of funding, startups need you

Tech startups in Australia are woefully underfunded. Far more is bet on the Melbourne Cup every year, per capita, than is bet on tech startups. Report after report bemoans the low level of funding, and the exodus of great Aussie ideas to Singapore and Silicon Valley demonstrate the lost opportunities. These types of business have scaleable business models, and could be $10m or $100m businesses in a few years. This kind of rapid wealth creation was simply not possible in earlier generations. Now is the time.

   2. The Economy needs you, because of digital disruption

25% of the GDP of Australia, and 40% of jobs, are under threat from digital disruption over the next 10 years. What kind of an economy will be left for our children and grandchildren? Where are the Aussie tech disruptors? Most of them hail from one country, pay little tax here, employ few people, yet are eating away at our economy.

   3. You have a lot to share and give 

You’ve made your money, are relatively well off, some might say wealthy. You have $1 million or more in various investments. How about carving out 2-5% of this for the tech startup scene? Take a a direct investment, and help seed a new business or three. Create jobs immediately, get involved and share some of your hard won advice gained over your own career in business. Pay it forward. Pass it on. Add value to this businesses, open doors. Have skin in the game.

   4. You get a tax rebate, and are capital gains tax exempt

Even better, from this financial year onward, investments in eligible tech startups attract a 20% tax rebate (yes, money back) from the ATO. Plus, you get a 10 year capital gains exemption, with no ceiling. Meaning – if you make a million or even a billion on the shares, it is tax free. The government is actively encouraging you, and rewarding you, for having a go. What’s stopping you?

  5. You’ll enjoy it 

Why not have some fun? You never know, you might learn something, have some awesome dinner party conversation, and can enjoy the ride. Why can’t business be fun? In fact, it should be.

So, if these 5 reasons have inspired you to find yourself a tech startup to invest in, then get yourself down to Spacecubed, listen to this podcast, or peruse these 140 WA startups.

Imagine if 1,000 angels decided to invest between $20,000 and $50,000 in some tech startups every year for a few years. That would pump in $20 million to $50 million a year to get 1,000 startups going. Among them could be a hundred $10m businesses employing tens of thousands, and maybe the odd billion dollar unicorn. Then we’d see some action, and maybe we’d even save our economy in the process.

Facebook and Google are eating the internet

Facebook and Google

Here’s an amazing statistic – last year (2015) Facebook and Google, combined, took an extra $1 billion in advertising revenue from the Australian market.

An extra billion. Not a billion in total, an extra billion, than the year before.

The thing is, the total ad market in Australia only grew by $300 million in 2015, which means every other advertising medium – print, TV, radio cinema, outdoor, online… – collectively took $700 million LESS combined.

This meant that every TV station, radio, cinema, newspaper, magazine and website was competing for a shrinking market, $700 million less than it was the year previously.

Ouch. No wonder we see redundancies in newspaper organisations, TV and radio stations the country over. And of course, this is not a phenomenon unique to Australia. If anything, we’ve been protected from it for a few years, but the impact is now in full force.

If you thought the ad model was a tough one, no stat makes starker reading than this one for Australian media organisations. Imagine a startup trying to make a go of it with an ad revenue model.

This trend of ad dollars to the 2 Silicon Valley organisations is only speeding up.

Recent predictions have Facebook and Google eating up 90% of all digital advertising by the year 2020. This means that as non digital ads continue to decline in size, there is no respite in digital ads, because the 2 internet mega-goths are gobbling that up too.

Now I have nothing against Facebook or Google. Like you, I use them all the time. I rely on Google to get me all the answers to the questions I pose during my day, as well as entertain and inform me on what’s going on. I flick through my FB feed once or twice a day, and it’s entertaining stuff. I deploy FB page at work. In business, most of my promotional budget goes on the 2 of them through Adwords or customised FB posts, and I’m not alone (as the stats above prove).

The question I have is: what kind of world are we hurtling towards, if these trends continue?

I am also a big fan of Uber, Airbnb, Netflix, Twitter, Apple, LinkedIN and the like. All of these are collectively eating away at our industrial and digital base, and employ very few Aussies by comparison to organisations of similar revenue. Very little of the income they earn in our country attracts any tax that remains in our country. They are all US-headquartered yet through various organisational structures manage to conduct their affairs via satellite organisations based in Ireland or Singapore. Although they take huge amounts of Aussie dollars from selling services to Aussies in Australia, they are not contributing as much as similar sized organisations that hold sway over large markets. They are not paying for the roads, schools, hospitals and defence that the government needs to provide. Meanwhile they are attacking up to 25% of our GDP, over the next decade.

I wonder if and when Australia (and other countries) will wake up to this? The answer is not to put bans on them (as the taxis tried to do over Uber), or ignore them (as the newspaper industry did for years until it was too late). The answer is surely to develop our own home-grown digital companies that will compete with them here and perhaps abroad. Companies like Atlassian, Canva and Freelancer. (How many successful Aussie tech companies can you name? Here’s a link to the top 50.)

I am amazed at the local tech talent here, and if we could release more funding, I reckon we’d throw enough darts at the dartboard to see if we can create some bulls eyes. It’s fast becoming a necessity now, not a ‘nice thing to have’. What economy are we going to leave behind for our kids if we don’t?

More reading:

How Facebook is slowly eating the world‘, Washington Post, April 2016

20 Ways Facebook is eating the internet‘, Techcrunch

Mobile ate the world, and Facebook and Google are eating mobile‘, Salesforce, June 2016

Uber disruption

share and share alike

Last week I got the chance to listen to Jerry Hausman, an economics professor from MIT, who spoke on ‘Startups – will their economic models take over?’ – a topic close to my heart.

The 70 year old econometrician started by pouring scorn on Twitter (‘I mean, don’t you have something better to do?’) which I thought was wonderfully ironic, given his audience contained the esteemed business leader and well known Twitter aficionado, Diane Smith-Gander, who was tweeting away live at the time. The point he was making was he was not necessarily a raving fan of these new businesses, despite being an avid user of Uber (‘They are 40% the price of taxis in Boston – in fact you could do away with public transport and give everyone Uber vouchers and it would be far cheaper for government’).

Uber’s valuation of US$62 billion and Airbnb’s of US$30bn defines them as ‘unicorns’ (valued over a billion) and have come from nowhere in less than 10 years. This was simply not possible when Jerry (or most of us) were growing up. ‘Stanford university was a backward country college, not even Ivy League, now people drop everything to get in there.’ Stanford has spawned Yahoo!, Google, Hewlett and Packard, Youtube, LinkedIN, Netflix, Paypal, Cisco and Sun among its alumni and is known as the ‘billionaire factory’.

The poster child of the sharing economy, Uber, has been incredibly disruptive forcing regulatory fights (and invariably, wins) in 68 countries and 450 cities. ‘Uber keeps dropping its prices and driver compensation, yet Uber wants to maximise revenue, so has to drive huge increases in sales.’ argues Hausman, ‘The drivers are earning less and less – in the US they only drive 13 hours week – and they also have to run their own cars paying for maintenance, petrol and depreciation.’ Jerry pondered if the Uber drivers were getting a good deal or not, and thought not.

In the US, cars are only used 4% of the time, and with regulation lagging the fast development of Uber, there is still upside for the company in terms of usage, and savings in costs for users. Imagine if the continued rise of Uber and their ilk meant that cars were used 25% of the time (a 6-fold increase). Many of us may get rid of our second car, or even give up owning a car altogether, as ownership made less and less economic sense. Imagine what would happen when self-driving cars become the norm, that you can hail easily through an app. What would that do to traffic congestion, car accidents, the environment, public funding of new roads, the health system, taxation, the insurance industry, car industry and car park revenues? This would disrupt many sectors, and drive fundamental changes (some for the better, some worse). But it does hinge on the economic model for Uber and their drivers working, and the public’s acceptance of the car sharing economy. Airbnb can do likewise for accommodation. I see many startups trying to be the ‘Uber for the x industry’. It’s the startup ‘model du jour’. We teach our children to be good sharers, might we as adults do likewise?

Jerry is not a fan of regulation, above the minimum, as he sees it crowding out efficiency and entrepreneurship. His favourite phrase was ‘I’m a fan of capitalism between consenting adults.’ Any large industry that has been over regulated over time is ripe for these new models to take hold. ‘How about the real estate industry’?, I asked him, ‘Is anyone, or could anyone uber that?’ Jerry replied, ‘It’s easier to uber your car ride, or your stay in a hotel, as we’ve all given lifts to people in our cars or had people over to stay. But the average person simply does not sell their property very often, so it’s not something they feel comfortable doing on their own. It’s a big ticket item, often their largest financial asset. That’s not to say it can’t happen, ever, but that will be a more difficult one to disrupt.’

I agree, and it’ll probably take some time before the real estate transaction is done directly between buyer and seller, but I also bet some people somewhere are working on this, and over time, even this transaction will be changed irrevocably. My advice to real estate agents, as it is for taxi drivers and hoteliers and anyone in a regulated industry, is to be aware of these creeping changes that can disrupt your entire industry, seemingly from nowhere. Don’t scoff at the technology, have an interested and serious look into it. Stay relevant. Keep your customers close. Don’t assume anything. If you wait until you’re waving placards on the steps of Parliament against some well funded and beautifully designed upstart to get interested in the sharing economy, you’ve already lost.

Set creative content free

Messy desk creative mind

Let us consider the desk of a music teacher. It’s a mess. Scraps of paper. Bits of old instruments. Manuscripts. Old tour programmes. Scrunched up notepad. Yesterday’s lunch remains. A half drunk cup of coffee. A lunky gonk. Some chewed pencils.

A Music teacher’s desk is the desk of a creative mind. It’s a buzz, a whirl, managed maelstrom. But put that same teacher in front of the school orchestra, and somehow magic can happen.

Imagine John Lennon’s mind, Mozart’s, Steve Jobs’.

Imagine what they must have been like to live with. Read Walter Isaacson’s authorised bio of Jobs and you don’t need to imagine anything – he was a pain in the proverbial. Maddening at times, brilliant at others.

Yet he looked at things millions had looked at before and saw how to think different. Looked what he created.  Not once, but twice at Apple, and also at Pixar. The Mac would have been enough for most people. But the out of nowhere he releases the iPod, 1000 songs in your pocket and single handedly saves the entire music industry.

What right did a computer company have in making music playing machines? And before you think “agh, but he controlled creative content, he did not set it free”, he actually did the complete opposite. He set us all free to buy creative content, for $1.29 or $2.19 from iTunes, because he knew that creating a new way to release the content did not mean no one pays for it.

It was FREE in terms of freely available (we can all, now on a whim, download any song to our device in seconds, which was just not possible a few years earlier or when you or I were growing up), but not free in terms of payment.

It was an elegant technological solution to a massive problem (something all startups should look to emulate). He set the content free, and billions of downloads and dollars followed.

Not finished there, Jobs then created the iphone in 2007 and ipad in 2010. What was he doing with phones? Thanks to Jobs, my phone is now my camera, my notepad and my diary. And a hundred other things.

Tablets had been a disaster for Microsoft in the 1980s. Yet whoosh – a mass of new creative content results in apps and the App Store. A whole new industry was created from thin air. And it revolutionised how we consume content. Much of it is (yes literally) free to consume.

Creatives can be a pain to work with, but without them.. you just get more of the same. If you want routine, order, then have control and carry on as before. If you want to create, set it free. Let others co-create, collaborate and fly.

I was the economics teacher. I was ordered. I was on time. I got good results. I dotted the i’s and crossed the t’s, and it worked.

When I went into business, thank goodness I did not do it alone. I met a crazy Steve Jobs’ type on the UWA MBA and it was his idea to set up the world’s first map-based property search web site, aussiehome.com, right here in Perth, way back in 1999. Nick was (and still is) a crazy guy, part genius, part brilliant, part rude, blunt…. We were ying and yang, it worked.

To think the new, means not saying ‘cos we’ve always done it that way’. When we ran aussiehome, we banned this saying. People learnt quite quickly that ‘but we’ve always done it that way’ was NEVER the answer, to ANY question. EVER!

We had ideas some mornings that went live that afternoon. I have since worked in other environments and the simple act of changing one web page was so controlled that nothing happened … for years.

Whatsapp, Snapchat… have little revenues, yet have been set free and are now each worth billions. They have 500m and 150m active monthly users respectively by setting their content free. YouTube, Facebook, Google, Twitter, Linkedin… have all been set up with free content, available to all, everywhere. That does not mean they do not earn money – Facebook earned $18bn in revenue last year, $3.5bn profit. Google revenue $74bn, $5bn net profit & 57,000 employees.

All are pioneering new 21st century biz models.

So, come on everyone, let’s free our better creative internal angels.

Start a blog. Learn to tweet. Take up a musical instrument. Write a book.

You’ll never feel as free as when you are feeling free and creative, doing things that are new and exciting, pushing the envelope.

Oh, and by the way, please feel free to tweet this content for free…  🙂

 

Photo credit: What we talk about messy desks blog

Beware the creeping changes

monsters

Things that creep up on you can be the hardest to recognise and defend against. Whether they be imaginary spooks hiding in the dark to frighten you from your slumbers, or people quietly tip toeing up behind you to shout ‘boo!’ in your ear, if you don’t see it coming, it can be unnerving when it’s already upon you. Of course, you are at your most vulnerable when you have no idea what is about to hit you.

Last week I saw a stat that really summed up all the digital changes that have been happening over the past 15 years or so. Online advertising in Australia surpassed the A$6 billion mark in 2015.

6 big ones.

The growth is not slowing either; since 2010, online ad revenue in this country has been rising at more than 20% a year. Last year it grew 28%. Within this growth, mobile ad revenue grew 80% last year, and video ad income 75%.

Online ad revenue was almost zero in the year 2000. I remember that year well. It was probably the toughest year of my life so far. There were illnesses in the my family, two friends of mine succumbed to cancer, and it was first year of my fledgling tech startup. Our initial seed funding had run out, and we had passed the dotcom crash after which no more investment funds would be forthcoming. I had quite a few sleepless nights, and not a few doubts. We had a few real estate agencies on board, but very few were paying very much, and it was going to take a while for us to get to cash flow positive, let alone profitability.

A few years on, I remember when online ads in Australia went over the $1 billion mark (2003) and then within two years had doubled to A$2 billion. At A$6 billion, it is now the number one advertising medium in the country. Print ads have fallen to A$2.2 billion and set to continue their decline. Movie ads, radio ads, TV ads, are being left in online’s wake.

When I talk to online tech people these days I joke that we had almost 100% market share of the online real estate ad market in Perth in 2000, but unfortunately it was 100% of very, very little. But as the online market grew, we kept ourselves alive long enough (sometimes I wonder how) to take advantage of the creeping change that was occuring all around us. We built a nice little business out of this, with real profits appearing in year 5 and dividends paid to shareholders from then on.

Today, realestate.com.au (ASX: REA) is worth over A$7 billion (share price $55). In 2000, REA Group’s share price was a mere 12c (half its listed price of 3 years earlier). It was touted as yet another dotcom disaster, an example of greed overtaking common business sense. With 3 CEOs in 4 years, it was but a few months away from closing shop altogether. Or so the wise analysts thought. By 2008, it had billion dollar value, and now after another 8 years is seven times that.

We weren’t the only ones to see that real estate search was broken in the last century, and that the new one would herald a new way of finding your next home. Many people knew this was happening, but the incumbents paid lip service to the imminent threat. Very few people are crying for them now. The 2 weekend papers that once had huge real estate (and cars, and jobs, and boats…) sections in them that landed on your doorstep with a loud thud, are now so weak they are having to combine forces to give themselves a few years more life. In an isolated marketplace with little competition (bar online, which they don’t have much share of). They hide their limp real estate sections in among the cartoon section. A tie up that was once thought anti-competitive, is now being hurried through.

I was once in a boardroom of one of the main paper-based media empires during the early 2000s. Accosting me from across the table, one executive jabbed his finger towards me saying: “Why would we turn a $380 million business into a $38 million dollar business?” (the online ad market being much smaller at the time, his reasoning was why would be chase the internet market and so herald our own demise?). Pausing for a while to take in this question, I answered “Because you have to. And if you don’t this year, it will only get more expensive the next year, and the year after that. It will only get harder for you to make the change.” He glared at me like I had lost my mind.

In all of this is a lesson. Never take things for granted. At your peak, be your most worried. When feeling most comfortable, be nervous. Analyse what is happening, what could happen, what you could do to take advantage of things. Some things will lead you down dark alleys, some of it will be wasted time, dead ends, but you’ll be experimenting, learning, feeling your way. No one can predict the future, but the onset of online advertising was certainly something that could have been foreseen, in the same way mobile and video ads are now galloping along.

Get on trend, or be left behind.

The $10 challenge

making the most of your resources

As a team exercise, you are given $10 and told to turn that into as much money as you can in a month. What would you do?

I used to give my management and marketing class (Year 10s) this challenge in their first lesson, and see what they would come up with. They’d be given some basic rules (no gambling, no begging, nothing illegal or immoral) and they’d have to work as a team to come up with a hypothetical solution. I wouldn’t actually give them $10 and they wouldn’t have to go through with it.

I’d sit back and watch. Some formed teams quite well, a natural leader emerged. A few ideas were thrown around, tested and they quite quickly came up with a few that needed further exploring.  Some groups saw it as an easy ‘doss’ lesson, sat back and did little. The noise rose. Other flicked pencils. It was quite different to how they’d been used to be taught, and they probably thought I was a little bit wacko.

I checked in from time to time, circulated around the groups, but other than that pretty much let them get on with it. For a double lesson a week they could work on this, plus some homework, and after 4 weeks they had to prepare their written plan, and a presentation with visual aids. They could decide who did the writing, who did the speaking, who did the visuals. In their other weekly lessons I taught some skills that might be useful, but did not make the link too blatant. The brightest realised I was helping them along, some others thought this was a proper lesson and took notes, but did not apply it to the $10 challenge.

When the day for presentations arrived, the groups that had slacked off relied on bravado and ad libbing to get them through. Their presentations were faulty, minimal, there was little thought and they mainly limbered along to an end, usually well before time. The others that had taken it more seriously went through some of the possible solutions, before building up a case for their best options. I gave a trophy to the best solution.

I did not care which solution they came up with, it was more the process I was interested in. From it, I could see their beginning level on leadership, team work, resourcing, budgetting, planning, risk taking, scenario planning, costs and benefit analysis, culture … pretty much anything relating to business and management really. During the year, the exercise became a rich vein of examples to refer back to. Later, some would tell me, ‘I wish I’d taken that more seriously, Mr G.’ Right.

I was at another one of those innovation breakfasts the other day (it is the topic du jour  after all) and I heard Shaun Gregory (Senior Vice President at Woodside) talk about a similar $10 challenge given to final year Stanford University students. ‘Turn $10 into as much as you can in a month, and come back and tell us how much you made and how.’

One group bought a few bike pumps and pumped up student bikes for money around campus, and had made $100 or so by the time of the presentations. Smart. Industrious. 10x return (less labour costs.)

Another took reservations in popular Silicon Valley restaurants and then sold these off for money to the highest bidders. They did not even spend their $10, but had a few hundred dollars by the end of it. Clever.

The winning group thought quite laterally. They sold off their own presentation spot to the company that wanted to present to the Stanford Uni graduating students. Top Valley companies compete for the best and brightest talent, and pay huge fees to research companies, sign on bonuses and countless internal hours in search. Here was a golden chance to pitch their business to the elite grads. The winning company paid many thousands for the chance.

We don’t even need to teach entrepreneurship to 15 year olds (or even under grads), we just need to give them the opportunity to have a go. We need to tell them it’s OK to have a go, to fail, to set up a company, to try to solve a problem, to look at things differently. We learn by doing. We need to say it’s OK to have the aspiration to be a lawyer or a doctor or a plumber or a singer or a social worker or a teacher, but also an entrepreneur. We need to celebrate entrepreneurship and success. Those that have a go. Those that take a quantified risk.

Here’s a final thought. If the $10 was ‘your life’, how are you going to make the most of it…?