As the infectious opening chords of Madonna’s Get Into The Groove rang throughout the Barnet Long Room at Customs House, a frisson of anticipation swept over the well-heeled business crowd. They had come expecting serious discussion of our recent national obsession with innovation: instead they saw the prospect of a lunchtime disco.
Satyajit Das’s sobering messages came soon enough, and did not let up.
Mr Das is the Australian international finance expert and author who predicted many aspects of the Global Financial Crisis and was featured in the Oscar-winning film Inside Job. Named by Bloomberg as one of the world’s top 50 most influential financial thinkers, he presented Desperately Seeking Innovation on Monday, kicking off the Sydney Writers Festival Business Bites event series.
Innovation is not a new concept; Thomas Edison called for us to do things differently a century ago, he said. So, what does the government mean when they trumpet ‘innovation’ as a panacea for our economic ills?
“The one thing I’m absolutely confident of is they don’t know what they’re talking about,” Mr Das said. “Innovation is a buzz phrase. I went through the innovation document and I can’t find one thing innovative in it. If you look at the money, it’s all going into advertising about how innovative we’re going to be.”
The vaunted Ideas Boom is a unicorn, and not the type that’s worth $1 billion.
Mr Das said our “renewed flirtation” with innovation is more complex than in Edison’s time. It has to do with our desperate need to create growth to maintain and improve living standards.
Growth, said Mr Das, is not a normal state, despite our dependence on economic growth. Growth is overrated. Google and Facebook aren’t technology companies. Uber and Airbnb aren’t innovative. Disruption destroys the economics of industries rather than creating new ones. He spent the hour smashing these and other conventional wisdoms, but conceded that we now rely upon growth to dig ourselves out of a debt and financial hole that has become increasingly engorged since the GFC.
The traditional drivers of growth are population, the opening of new markets, productivity improvements and innovation. With the world’s population set to peak, and only North Korea remaining as a closed market, the first two drivers offer few opportunities. Mr Das said productivity gains would not drive growth because in our new, services-oriented economy, “a one-hour massage still takes one hour”. By its nature, service provision will not see the productivity gains achieved in manufacturing as a result of the industrial revolution.
So we are left with one last hope: innovation.
And so back to Madonna. Described by Mr Das as “the great innovator”, Madonna has reinvented herself several times over her career. But much of what we now call innovation is, in fact, cannibalisation. For example, the smartphone has subsumed 27 different devices, resulting in shrinking net revenue rather than growth.
“One of the things that we’ve taken on with the debasement of the term ‘innovation’ is that cheaper things are innovative,” he said. “Innovation is about finding new ways of doing things, and creating industries, employment and all those ancillary things that create wealth across society.”
“The internal combustion engine, which is probably the epitome of innovation, is also the cause of what will be probably the demise of the human race,” said Mr Das, referring to the rampant consumption of fossil fuels that has led to dramatic changes in our climate.
His message was that our society and economy are gravely ill and a passing innovation fad will not serve as an adequate cure for our debt and growth ailments. Education, research and infrastructure are the real path to innovation according to Mr Das. He said essential investment in these areas is held back due to the NIMTO effect – or Not In My Term of Office – the idea that modern political leaders are unwilling to back projects that deliver benefits beyond their own term of government.
During question time, one audience member seemed to have missed the point when he asked for suggestions about how to “bullet proof” investments. In his response, Mr Das pointed to the systemic issues.
“This is not a problem that’s easily resolved because this is a problem that’s taken 200 years to create,” he said. “The only way to solve it is to change the entire system, reduce consumption and gradually work off these excesses of debt. That’s a very long, slow process. And to do it without actually destroying the social fabric of society? That’s not an easy task. Falls of empires – and that’s what we’re now talking about – falls of empires are not pretty.”
As the pulsating beat of Madonna’s Like A Prayer swelled and faded, a sense of unease seemed to settle over the crowd. Satyajit Das delivered his final observation: “Innovation is now a magic incantation with the power of prayer.”
Time we all had a dance – for inspiration.
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