The dangers of economic nostalgia

Efforts to prop up an older version of the Australian economy are increasingly getting in the way of us embracing the emerging one.

Recently I’ve been struggling to square economic commentary in the media with what I see every day in this market and the facts I know about the global one. I’m concerned that nostalgia for an old version of the Australian economy is increasingly getting in the way of embracing the emerging one and that this nostalgia could prevent the creation of a true “Silicon Beach” as well as other seedbeds for innovation in Australia. Here’s why.

When I speak to young people trying to puzzle out future careers, I stress one thing above everything else: portability. Portability is critical in the new economy. The first mistake you make as a fresh member of the workforce is to buy a car. The second mistake: to buy a house. I tell them that their parents’ approach to being successful might not be relevant today and then I tell them why.

Twenty years ago, the late Walter Wriston, one-time CEO of Citibank, predicted what he called the “twilight of sovereignty” in an influential book of the same name. Wriston outlined a future world so globalised by technology that borders would no longer be able to regulate the flow of talent, ideas or even intellectual property in any conventional economical way.

Brain work in one country would be transmitted electronically to another where production was cheaper and that brain work would be turned into physical products there for export back to the advanced economies where it was too costly to be produced. 

Wriston’s point was that the real value – the monetisable value – was in the brain work even though standard economic analysis might miss that value by merely monitoring outflows of products. In other words, the money was in the brain work, but that brain work wasn’t going to pass through conventional shipping channels, it wasn’t going to get stopped and counted at customs, instead it would slip into one country invisibly via the internet and then leave as a physical product to be counted as an import in its actual place of origin.

Later, Thomas Friedman confirmed that Wriston’s predictions were actually occurring on a wide scale in his bestselling The World Is Flat. And these trends were, and are, unstoppable. 

None of this should be news to anyone with even a passing familiarity with the market today, but you wouldn’t know it when encountering some of the outrage over the ongoing contractions in manufacturing, outrage premised on a basic undervaluing of the adaptability of the Australian worker, the proven efficiencies and work ethic here and the technologies that will harness this. The outrage is also premised on a failure to acknowledge that major developed economies, comparable to Australia, have long ago ceased making cars and are doing well on brain work.

We are already seeing evidence of this trend in Australia. Enlightened councils are pushing for telework centres that will give workers and companies options and flexibility when it comes to making the most of a talented and far-flung Australian workforce. 

Even in Geelong, where traditional manufacturing just took a dramatic hit with Ford’s departure, brain work – utilising all the tools of our time – is on the ascendant. Software companies are taking advantage of lower-cost regional living to build Australian development teams instead of offshoring. In fact, technology, be it teleconferencing or instant access to data no matter where you are, will not only open up new possibilities for the Australian workforce, it will open up regions by providing people with access to the best healthcare whether they live in a city or a small country town. 

It’s also worth noting that Ford is retaining key engineering personnel here in Australia. That’s brain work again, harnessed talent where it is strong and ready to be exported via the internet to other places where it can be more cost-effectively produced. The rise of 3D printing will also make the importance of exportable thought products even more valuable and the need for connecting distant workers more urgent.

The Federal Government’s decision to allocate $19 million for increased telepresence in its recent budget is important recognition of the evolving Australian economy and it comes on the back of numerous studies, including a recent government white paper, that show a very large proportion of workers are happy to embrace teleworking. In fact, up to 60 per cent of workers approaching retirement have indicated that they would delay their retirement if they could take up a telework position.

Australia’s future must be built around this kind of motivation to be found in its sophisticated, world-class workforce, arguably this country’s greatest natural asset. The nostalgic approach treats this workforce as something that has to plug into traditional economic activity if it is to have any value, when it is, in fact, the exact opposite: it is the economic activity that must plug into the vitality and talent of an inter-connected workforce.

The divide is between those who see the passing of auto manufacturing as a tragedy and those who see it as an opportunity to commit to the future.

When renowned innovators call for Australia to support the next big thing by cultivating that “Silicon Beach”, this is exactly what they mean. The only difference is that this beach can stretch across the continent, connecting country towns with capital cities and the mountains with the beaches. Innovation and productivity can happen Australia-wide now and it needs to if Australia’s economy is to remain strong.

Tim Gentry relocated to Sydney to serve as the Managing Director Australia/New Zealand, Avaya in 2012.

He holds a Bachelor of Science Degree in Business Information Systems, Master of Business Administration in both International Finance and Global Information Technology from American University, Washington DC and is an Alumnus of Harvard Business School.