May 6, 2024 | Operations, Strategy
As we seek to move towards 3% of GDP as a measure of the R&D in the economy, we are assuming that simply increasing the percentage will increase the output, in some sort of linear manner.
Ranking as we do at 93 on the Harvard list, squeezed between Uganda on 92, and Pakistan at 94, we need to do something different.
We have not asked the question: what changes need to be made to the multi-jurisdictional, fragmented and short-term focused system we have currently.
In my view we should.
Before we throw more effort and money into the existing system, we should be questioning if the system is able to deliver the outcomes being sought in an optimised manner.
Assuming we elect to keep the existing system, (a given I suspect) we should start by asking challenging strategic questions about the technology domains we need to focus on, that contribute to the shape of the economy we envisage in a decade or two.
That is easy to say, sadly, it is extraordinarily hard to do. It is even harder for the answers that may emerge to get any traction, by way of public awareness and funding. Without exception, the questions we must ask will run against the readily available answers that reflect just the extrapolation of the status quo, perhaps with a few wrinkles.
Inevitably, multiplying the complexity of the challenges faced will present problems with no apparent answers, or they would have been answered before. That is why the cycle from science to commercialised product is so long, in most cases, 30 years or more.
Change needs a catalyst, which usually comes from unexpected angles.
Take the development of mRNA vaccines during Covid.
To most this was a rushed and half-baked process, as we all know that the pharma innovation cycle is at least a decade, from identification of a molecule of value, through product development and increasingly demanding levels of clinical trial. Here, it happened in 18 months.
Thing is mRNA vaccine development did not happen in 18 months.
The logic of what became mRNA was first articulated in 1956, and had been investigated continuously for the following 65 years. Suddenly the catalyst of Covid emerged, and the next decade or longer of development was compressed into the 18 months. This is simply because most of the work had been done, under the radar, and on a small scale, scientists knew it was extremely promising, they just lacked the catalyst and therefore the funds to prove it.
The question here was: can the expensive and technically very difficult production of mRNA be proved and scaled in 18 months? Clearly the answer was ‘yes’ and now we have mRNA as part of the pharma arsenal.
The PM has committed a billion dollars to developing a manufacturing plant in the Hunter that produces solar panels. On the surface, it is dumb, and has been condemned by many, including yours truly, and chair of the productivity Commission Danielle Wood.
However, what if we asked the mRNA question: Can the production of electricity from solar be re-engineered to use significantly advanced technology over what is currently available? If so, that may enable the plant to be a ‘next technology generation’ solar plant that sets a whole new standard.
The whole basis of the current argument that the investment can never be commercially viable because the Chinese have a stranglehold on the existing technology and cost structure is out the window. A new plant using new technology, delivering lower cost structures and capital productivity would make the current dominating technology redundant.
The intensity of intellectual effort required to ask and investigate these alternative questions is extreme.
The odds of one of them identifying an opportunity that is, with the benefit of hindsight, a ‘unicorn’ is tiny, so the political risk is significant. However, if we allow ourselves to be seduced by the fantasy of doing more of what has resulted in our current situation and expecting a better outcome, we will deserve the shellacking the investment will receive.
Two years ago I had a shot, and nominated three headline domains where we should be investing, and my views have not changed. Sitting under these three headlines are a host of opportunities for a focused R&D effort that should be considered by experts in the various fields, choices made, and long-term investment locked in.
Header is from the extensive StrategyAudit slide bank.
Apr 22, 2024 | Governance, Innovation
Suddenly, everyone is interested in batteries.
When mobile devices took off after the launch of the iPhone, the demand for batteries with a longer life than the then existing chemistry could deliver took off as well. Panasonic held a dominating position in this new market, being the major supplier of batteries made using Lithium as the power store.
Then along came Elon Musk. The first Tesla cars, the initial roadster and early models of the series 1 and 2 sedans used what was in effect just large-scale Panasonic batteries. Individual units were linked together with cooling tubes assembled into the pack to dissipate the heat generated by the lithium, which otherwise led to spectacular fires.
Musk in collaboration with Panasonic envisaged a ‘gigafactory’ in Nevada that would supply the packs. As has become a pattern, Panasonic found the task of working with Musk all too much, and were bought out. However, to the point, an essential part of a lithium battery is a range of rare minerals, amongst them Cobalt.
The Democratic Republic of Congo (DRC) hardly democratic, holds almost all the worlds known reserves of Cobalt. Rapid development was inevitable, as was the corruption of local power brokers, and the human rights blindness of the major corporations. Cobalt is a dangerous material, yet much of it is mined by kids in holes with a pick and shovel, dying like flies. There is a registration process designed to monitor and outlaw these practices, but they are useless.
The challenge of replacing Cobalt is therefore the focus of much scientific attention. It is the chemistry of batteries that will deliver a power to weight ratio that will guarantee longer charge life, in everything from your phone to your car, and all the other uses to which Lithium batteries are suddenly being placed.
The world as a choice of three strategies, which should be mutually exclusive:
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- Find an alternative to cobalt, and quickly.
- Find alternative sources of Cobalt, leaving the DRC out of the picture.
- Internationally strengthen and enforce the existing regulations on the mining and processing of Cobalt to remove the incentive for the current corruption and exploitation that occurs.
The first two options are clearly the best. However, the challenge of replacing Cobalt requires a scientific breakthrough that while probable, is yet to be made, and the DRC remains the primary supplier. The third option seems to be beyond our joint capability.
The first to find and commercialise a solution will reap the rewards.
Apr 17, 2024 | Change, Leadership
The following is a post that I drafted at the beginning of the Corona epidemic but did not post.
It is a personal reflection on ageism, that becomes increasingly relevant as older, retired workers I see around me now going bonkers from boredom. Few want the pressures they had as youngsters climbing the slippery corporate pole, or struggling to manage and grow an SME, but they do wish to remain useful, relevant, and earning a bit of pocket money.
By ignoring this growing cohort, we are also ignoring the wisdom of hard-won experience, and 4 years later, thought it worth the question.
At 34 I landed my first job as Marketing Manager of a stand-alone business, a significant FMCG manufacturer.
The business was an absolute basket case, and in the middle of a major investment in new facilities in Western Sydney that was financially and operationally irrational. However, the move of location encouraged a number of the marketing personnel I inherited to leave. This gave me the opportunity to recruit people who I thought had the skills and mindset to contribute to the massive task of rebuilding.
The process was a standard one for the 1980’s, via a head-hunter who provided a big list of potential people against the brief I had provided. Amongst the guidelines was a requirement that he find people who had a different background and skill set to my classic FMCG marketing history. On that list was an older bloke, late forties, who fitted pretty well the profile of what I was looking for, and who in addition, was desperate for the job. His previous employer had ‘re-engineered,’ which was one of the management fads at the time, and he had been a victim of that ‘re-engineering’.
I had several conversations with him over a couple of weeks, and eventually decided against hiring him. At the time, I rationalised this decision as being sensible, as he was late forties, seeking a job for which he was overqualified in a number of ways, working for someone who was significantly his chronological junior. I assumed he would move on as quickly as he could, leaving me with a problem I simply did not need.
Even at the time, in the back of my brain, I also knew I was intimidated by someone so much older, with far more experience across a range of areas where mine was lacking. How would it look, risking being shown up by someone who formally reported to me?
Over the subsequent 10 years as we dragged the business kicking and screaming into the 20th century, as Marketing Manager, but also controlling several other functional areas for 8 years, then GM for 2 years, I reflected on my decision about this man. How much would his experience have contributed, even if just for a short time, as we transformed the business from the basket case it had been, to the much larger and very successful business it had become.
Almost exactly a decade later, I found myself ‘re-engineered’ after ongoing differences of opinion with the Managing Director of the corporate of which we were a division, reporting at the bottom line.
It was then that the frustration and desperation he must have felt really hit home. I discovered I was too experienced to be a Marketing/Sales manager, but too inexperienced to be a General Manager/MD. It is also possible that the reality is that I am not as ‘pretty’ as some, and believe strongly in expressing views in as frank and open manner as possible. This is a toxic combination in an interview process for a corporate role.
It also seemed that at 46, and dispirited, which I had become after 18 months of relentless looking, I was too old.
Ageism had a face, and it looked back at me every morning as I shaved. In no way was that ageism deliberate, or even more than partially recognised at the time, but it was there, lurking in the background.
As a result I started to take seriously some of the conversations, advice, and a few paid ‘quick fixes’ I had delivered over the 18 months of ‘gardening leave’. The paid ones utilised not only my skills and experience, but attitude. None evolved into a long-term job. However, they paid some of the bills piling up with a young family, which was at the time gnawingly stressful.
I look on now and consider the manner in which the carnage being wrought by the Corona Virus will impact on a huge number of peoples lives. I shudder at the number who are experienced, qualified, and who will not be able to regain employment that leverages those skills.
At 68, I think I am in a better place to make a contribution than I was at 45, 55, or even 65. (I am now 72, and the observation holds)
I wonder how many Millennial, or Gen Y managers will want to risk being shown up by someone who has seen and survived a bunch of booms and their subsequent busts over a long commercial life? Just as I feared I would be shown up back in 1985.
Despite the progress made over the last 25 years in recognising the value to be contributed by genuine diversity, I fear that as we start the long road to recovery, ageism will again rear its ugly head. It will leave huge amounts of experience, resilience and capability withering in the lines of unemployed, or at best, underemployed.
Apr 15, 2024 | Governance, Leadership
We lost an intellectual giant last week, Daniel Kahneman.
Psychologist and Nobel prize winner in economics, he along with long term collaborator Amos Tversky, created what has become known as ‘Behavioural Economics’.
So what you say.
In 2010 Kahneman published research that demonstrated that income was strongly correlated with happiness at lower levels, but above a seemingly modest level (US 75K at the time) it had no effect.
In 2021, a Wharton academic Mathew Killingsworth published a paper that came to the opposite conclusion.
In order to reconcile these conflicting outcomes, Kahneman teamed up with Killingsworth and a third, neutral researcher to establish the truth.
The result was a case of diminishing returns.
It found there were substantial gains in happiness up to 200k income, but after that, diminishing returns kicked in. The ‘happiness curve’ flattens out, eventually delivering no increase in happiness with an increase in income.
This seems to make sense to me.
At a point, an increase in income does not increase happiness (I aspire to discovering that point) it just becomes a scorecard, no different from the one used on a golf course.
Given this instinctively sensible outcome, should Dr Chalmers add a level to income tax?
At a point above an income level few will ever see, impose a further meaningful tax rate on the increments?
Despite the inevitable screams, they will not miss the money, and you never know, it just might make those few happier.
Apr 8, 2024 | Change, Leadership
The only way to solve a problem, particularly a significant one is to understand the cause of the problem and eliminate that cause.
Rip the band-aid off.
Taking a short-term action to address a symptom of a problem is just kicking the can down the road. The problem will return unless the root cause is addressed.
In a previous life working in a regulated industry, I observed many problems that were never addressed. Simply, they were papered over with a short-term fix that looked good as action had been taken. However, they only served to compromise performance and leave the problem to someone else. The industry ended up with a huge pile of band-aids obscuring and complicating the identification of the root causes of the problems that continued to emerge.
Deja vu is upon us.
The current housing crisis is an outcome of decisions made progressively over the last 40 years. Some were made with the best of intentions, others for purely political reasons. However, the chickens are now crapping all over the hen house in the form of a housing crisis that will not be solved by sticking another band aid, or even a couple of boxes of them, over the symptoms of the problem.
The solution hides in addressing the cause.
Progressive governments have given investment in real estate significant tax advantages. This diverts that investment from alternative more productive uses, leaving us with the current shortage of housing, and stratospheric rents.
Ripping the band aid off now will be extremely painful for tax advantaged investors, but is essential.
There is a budget due in a few weeks, I expect more band-aids.
The current government when in opposition lost an election by proposing some sensible but relatively painless, to most, measures that started to address the root cause. The then government, now the opposition, was relentless in painting the sensible moves as robbery by the government.
It was as stupid and false as to claim that electric vehicles would kill the weekend.
Most of us would be better off with changes being made, our children and grandchildren most certainly would be.
Unfortunately, the battle for political power outweighs consideration of real debate, long term perspective, and benefit to the majority.
The longer we leave it, the greater will be the pain when the time comes that we have no option but to rip down the mountainous pile of band-aids.
