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Andrew Liveris AO on defining the toolkit for the 21st century

MARIA MACNAMARA: Good Morning distinguished guests, ladies and gentleman, welcome to I acknowledge the traditional owners of the county on which we all stand throughout Australia, and I recognise their continuing connection to land, waters and culture. I pay my respects to their elders, past, present and emerging. The music we were just listening to was performed by the late Geoffrey Gurrumul Yunupingu. My name is Maria MacNamara and I’m the CEO of Advance is the trusted platform that connects global Australians with one another and Australia. We do this to unlock the economic and cultural opportunities through collaboration, investment and innovation. We recognise and celebrate the achievements of global Australians like our guest speaker today, who are at the forefront of their field, to inspire the next generation. 

Today’s roundtable is a demonstration of the power of this simple idea. I extend a very warm welcome to colleagues from across Australia, Papua New Guinea and the United States, as well as the UK. This includes the Honourable Arthur Sinodinos AO, Australia’s Ambassador to the United States, John Berry, President of the American Australian Association and former US Ambassador to Australia, and our very own Megan Clarke AC, head of the Australian Space Agency. I welcome guests from the private, the public and the not for profit sectors, from consulting, education, here and in the US, and members of the Advance Board and our Advance Ambassadors. 

Thank you for joining us today. Before I move the focus to our honoured guest, Andrew Liveris, let me share with you briefly how today’s program will unfold. I’ll introduce Andrew and invite him to make his opening remarks, then we will move to a facilitated Q&A and the closing remarks will be offered by Professor Roy Green before our partners for today’s event, Internet 2.0 offer the thanks. Today’s round table is made possible because of the generosity of Internet 2.0. This is a cyber security company that was launched in 2019 and is building technology to protect Australian businesses.

Please keep your camera on and your sound on mute unless you are being asked a question. And most importantly, we encourage you to observe the Chatham House rule. The session will be recorded for the purpose of preparing a summary without attribution, and this will be shared at the end of today. For the conversation to work, I call on everyone to observe the rule. 

With that, permit me to introduce you to our very special guest, Andrew Liveris. A member of the Advance Awards judging panel, and a very good friend of Advance. Rather than repeat his many and impressive achievements, which we’ve already shared with you, I want to shine a light on the work in which he’s currently involved. Andrew sits on the Board of Directors of IBM, Saudi Aramco, Worley (Deputy Chairman) Lucid Motors (Chairman), NOVONIX and the Minderoo Foundation. He is also on the advisory board of Sumitomo Mitsui Banking  corporation, Teneo (a global CEO consulting and advisory firm) and NEOM (an initiative driven by Saudi Vision 2030). He is Chairman of the BlackRock Long Term Private Capital Fund and Special Adviser to the Public Investment Fund (PIF) and the Crown Prince of Saudi Arabia. Andrew serves as a Trustee for the King Abdullah University of Science and Technology (KAUST) and is a member of the Concordia Leadership Council. 

Andrew sees the world differently. He’s involved in so many parts of it. He was recently quoted as saying about Australia, “Why don’t we become the technology provider to the world on ways to have health and hygiene in your food supply chain? “Why aren’t we the number one precision agriculture country in the world, and figure out how to use the best farming techniques, crop rotations, minimise deforestation and use of water?”. Today, Andrew gives us an opportunity to ask the questions and hear his views. There’s much he has to say, and we want to hear it, and be inspired by it. I welcome his opening remarks.

ANDREW LIVERIS AO: Thank you Maria, and thanks everybody for tuning in from around the world and to some of my very good friends, some you mentioned, some that you didn’t. I’m always privileged, always pinch myself that I get a chance to talk to people like yourselves. At the end of the day, like that old adage says, ‘you can take the boy out of the country but you can’t take the country out of the boy’. What that really means is that I never left my Australian roots in Darwin and Brisbane and all things Australia. 

These days Sydney and COVID have created a wonderful opportunity to get reacquainted with this great country on such a granular level. I bow to the leaders who steered the country through COVID so successfully. I know we’ve got our flashpoints and hotspots, and certainly have concerns and anxieties but, I really am very pleased that I can be here in Australia with my family and be part of what is in essence a rediscovery of what makes Australia great. This great sense of mateship, kinship, fellowship and community. This notion that we can punch above our weight; the notion that we are a country that really has been forged out of our history, our history that we re-embraced with our indigenous people, and what they have done to make the land so sacred, and what we are doing in more modern settlement times to add value to this wonderful continent. There were a few comments I’d like to make around the topic that I was given but certainly will narrow it down to some of the more recent work I’ve been doing. I know Roy Green is on, he’s the other high priest of manufacturing in the country (if I can call you that, Roy). I’m very glad to add my voice to that very important topic which I’ll get to in a second. 

Starting at the very broad end first. The volatilities that have been around in human history go back a long time, and when we live this current volatility there is one big difference. But if you go back, there’s volatility in markets, and commodity markets in particular, all the way back to the Egyptian Wheat harvests. Or the Tulip Bulbs crisis of Amsterdam in the 1600s, where one single Tulip was worth more than the entire country estates or twice the amount of a Rembrandt painting. There is this notion of humanity and what we do on the planet to create this volatility. Warren Buffet and Alan Greenspan talked about ‘unrestrained exuberance’, herding behaviour, a lack of risk management, discipline, greed without fear, followed by fear and anxiety, then the black holes of an inevitable crash. History is riddled with this. Milton Freedman, the great Nobel Prize Winner in economics pointed out: “the one thing about history is we don’t learn from history.” I think this is instructive as I define leadership in the 21st century from my vantage point, my privileged position leading one of the world’s largest global corporations. 

We ended up embracing a term in the last 20 years called VUCA which many of you may know. It’s an acronym for Volatile, Uncertain, Complex and Ambiguous. That cycle that I talked about in history, but also this century’s cycle. If you think about the punctuations we’ve had that define V, U, C and A: think of 9/11, the GFC, and now look at this pandemic. In 20 short years in this century, VUCA has gone to a complete new level. One may wonder, what’s going on here? What are the tectonic shifts that are creating more rapidity in crisis, more uncertainties, more volatilities? And has humanity got the institutional systems to cope with them? If you think about what’s going on – and I certainly see it at my old company now – there’s a redefinition of many things. There’s a redefinition of institution, enterprise and corporation; and of public ownership and private ownership. And there’s a redefinition of global institutions, with much written about this lately, with the post-WW2 world order under massive tectonic attack. Countries are retreating from what was created, and the systems that gave us the wealth creation of the 20th century. There’s a redefining of the global world order as Ian Bremmer from Eurasia now calls it – the GZERO. Not a G20, G7, G8, it’s a GZERO, which as its name implies, there’s a lack of direction and leadership at the world order. 

What is leadership in the VUCA world? Why is this happening? And what response mechanisms do we have – as nations, as enterprises and public companies, private institutions, and governments – trying to react? We are redefining the interactions between citizens and society, business and enterprises, and governments and their associated affinity models like NGOs and others. And the reason that it’s being redefined is that the tectonic shifts that are happening have been accelerated by digitalisation. For example, these machines that we communicate with, that we are communicating with right now; rapid communication; and the lack of fact-based reporting. Fact-based journalism has been thrown out and it’s effectively become a social media phenomenon. We are now rumour mongering and gossip mongering at the speed of ‘live’, making us wonder, what is fact, who is speaking truth, and what does truth look like? 

Digitalisation has accelerated that literal butterfly, flapping its wings somewhere, so it can become a hurricane somewhere else. These perturbations that are occurring due to digitalisation have not yet been controlled and contained and certainly no institutions have been created by it’s inventors. Humanity invented and accelerated the pace of communication and digitalisation, but it has not built the institutions to actually control, contain and harness these powerful technologies. That’s one major shift that has occurred that distinguishes this century’s crisis and leadership’s response to the previous centuries and all of human history. Of course, there are two other major shifts that we’ve been living with for a while. One crashed around our ears in the 2008/9 period: the GFC. That was a recognition of something that I’d been talking about for most of my time at Dow, which is what’s happened to the global economy such that money and finance dictates the pace of the economy and not invention and creation and development of human ideas that make a difference to everyone on the planet. The funding and flow of capital from 1985 to 2005 went up by an order of magnitude of one thousand. That’s a thousand times more money flowing around the world, then the eventual creation of the goods that underpin the flow of that money. It meant that the political order and the financial order got together and in essence said, “my reactions to whatever the crisis would be is to flow money into it” and not actually to get together and create win-win solutions of the policy and fiscal kind. That meant that governments got judged on short termism and whatever was said to get re-elected, is what they unsaid when they got elected. Democracies and capitalism started to have a very uneasy relationship and the division between the rich and the poor accelerated. 

That also happened to enterprises like mine, where public ownership became the ‘sum of the parts’ analysis done by financial engineers sitting in front of desks, an average age of 28-32, who thought they knew more about running companies than people that spent a lifetime understanding what makes a company run for the long term. Short termism, and the inability for humanity to put true metrics that had long term measurements, became a new trend. This in essence has led us to antiglobalisation forces. Economic nationalism, the retreat to one’s borders, looking after one’s self, is a cry from all the citizens of countries saying: “you have not distributed wealth fairly, we want to actually have access to healthcare and education and actually frankly, it’s only the rich who can get that access.” That of course is very pointed at countries like the US and less of an issue here in Australia, but of course it’s not without its presence here in Australia.The third big shift has been the one that, as far as I’m concerned, is the definition of our ultimate crisis. There are 7 billion people on this planet, becoming 9 billion by 2050, and our planet is bursting at its seams. We are literally not able to put in place the protection of our planet. Whether it be climate change, emissions, or health management such as the cause and then the reactions to pandemics like this one, we are basically without a rule and an order and global institutions that can manage that. We can barely manage it at country levels. 

Let’s look at those three big trends, especially the speed and rapidity of change that digitalisation has brought. The old management model that I used to talk about a lot with other CEOs, is: look at reality, make your choices, lead the change, build the team to implement the change. That’s still the management leadership paradigm that most enterprises try to lead by. But rapidity of change has meant you have to press repeat, repeat, repeat, repeat on those four cycles of leadership. It also impacts the institutions that I know something about, namely, publicly listed companies. The responsibility of management and boards has changed dramatically. There’s a whole thematic about what’s happened to boards and the responsibility of boards to shareholders. It means boards and board membership has changed to be more representative of all society, not just a small segment of society. Boards have had to become activist boards, had to become portfolio managers to understand not just the financial returns, but the returns to all of society. Strategy, risk management, talent and portfolio management at the board level has become the paradigm that publicly owned institutions have to be measured by. The additional big change is that purpose-based business has arrived. Whether it be the millennial generation that brought us here, or the wakeup call of the three factors I talked about, in particular the protection of our planet, management is now being held accountable by everyone in society. The Business Roundtable of America announced it’s responsibility to all stakeholders, not just the financial owners. This license to operate mindset has meant that purpose-based management / values leadership / ethics-based leadership has to not only be in our governance model, it has to be in our trust model. That is, our trust model to our regulators, and our trust model to our citizens – the people who use our products, the people who buy our services. The people who represent us on our boards should have the view of everybody that our enterprise touches. That’s for sure one of the most important changes that has occurred in corporations that affects the entire private sector ecosystem.

What hasn’t happened is the response curve from governments has been slow. The relationship between regulator and ‘regulated’: how actually these things happen has been one more punitive measure, congressional hearings, commissions, the old carrot and stick model, fix ourselves otherwise we withdraw your carrots. These are 20th century toolbox responses. How do we get 21st century regulations? How do we create the win-win model? What is at the centerpiece to actually create the enterprise of the 21st century, and for that matter, the governments and NGOs that help the partnership model between enterprises, public sector and private sector, as well as government? These are the sorts of things that mean we have actually have to put a new type of leadership model in place. I’m a big fan of the notion that leadership models should occur in the collaborative role of what is, in essence, the triangle of the new world order of business. What is that triangle? At the top is society, at one apex is business and at the other apex is government. Society needs all of society – whether it be those in academia, in union movements, in person on the street, the people that receive all the policies from government and get employed by the directors of business. That collaboration model is not yet in place and frankly I think the 21st century institution has to develop that. 

The 21st century institution therefore needs a 21st century toolbox. The only one that I think has worked and has worked throughout history, and made this possible, and in fact is creating the need as we sit here, is the one that is centric on entrepreneurism, innovation and human response through creativity. Clay Christianson defined this when he talked about creative destruction in his famous book the Innovator’s Dilemma. The disruptive enterprise is the one that disrupts itself, that looks in the mirror and says I’m going to change my business model, because of this new paradigm that we are in. If you take an oil company making oil and producing petroleum, if I don’t factor in all these changes that are occurring in this apex as a society, then I will be extinguished. I have to become a renewables company, and I have to be my own disruptor. Now how does one do that, using that example? You do that by a lot of brave and courageous decisions, and those brave and courageous decisions have to start at the boardroom, at the C-suite, and the collective that is called the ecosystem you operate in. I believe that innovation of the creative kind and the rapidity of the need is something that our institutions need to be retooled for. Retooled means you need to get the government side, and the business side to actually sit at a table with society, listen carefully, and implement the changes that the 21st century has brought. As I close my opening remarks, that brings me to what I am very passionate about, and one of the topics of course that I’ve spent time on in the last few months here in Australia. I’ve spent most of my career thinking about it, wrote a book on it, then actually drove, if you like, some of the changes that the US economy adopted under President Obama and later President Trump. And not just the US, the UK and other parts of the world. That is, to make stuff. 

You might think that’s a simple way of saying what manufacturing is. But manufacturing isn’t just about making stuff, it’s like I used to say at Dow – you invent stuff, you make stuff, and you sell stuff. Then you obviously get a return and a reward to keep you doing that. The rest of us are overhead. People-centric to the ability to create, make, supply and sell, and put that in an ecosystem where small, medium, large activities can occur. That drive to the tectonic shifts that are the challenges of the 21st century, that actually say, I need reliable supplies of medicines and healthcare, I need reliable supplies of things that humanity needs to protect the environment, I need full recycle, I need renewable energy, “I need, I need, I need”. These challenges based in the 21st century need to be put into place in terms of government policy. with a strong response curve from the private sector. and all of us need to find ourselves in the win-win of the answers. This comes not just from innovation, but it really comes from a new business model of public-private sector collaboration. It also means a redefinition of things manufacturing. Manufacturing was in the 20th century: invent and repeat and assemble and repeat, and repeat, and assemble and repeat. New sector manufacturing, the new side, is: discover, create, design, scale, supply, recycle, invent and create and design and supply. That speed has accelerated thanks to digitisation. I really do believe that Australia is ready to embrace the new world order of manufacturing, I do believe we can become an innovation centric economy, just like Maria said at the introduction with agribusiness and food. I do believe that there’s an opportunity out of this crisis, and that out of crisis does come opportunity, as the famous Chinese symbol of crisis and danger foreshadowed. Just this morning I received a note from Warren Buffet, for some reason he thought of me and sent me a note that said “how are you doing down there in Australia? I hear there’s some problems in Melbourne and Victoria” (just to indicate to you that the man reads everything!). But in his closing paragraph he said, “I am feeling great, this crisis is giving me a lot of great ideas. That’s an 85 year old billionaire who’s still as fresh and alive and creative as he was when he first began his journey. That’s the spirit we need to embrace as we look at the redefinition of a manufacturing sector here in this country. I look forward to hearing your questions, and I hope I laid out a rich menu of things you can ask me, thank you Maria.

MARIA MACNAMARA: Thank You very much Andrew. As you ‘re making your observations from your conversation with Warren Buffet, Mike Zimmerman’s smile got bigger, he’s a partner at Main Sequence Ventures, and what they do is invest in manufacturing that matters. They invested in tomorrow’s industries and they’ve supported companies like Myriota, Gilmour Space, v2food. Your presentation would have also spoken to two of our emerging leaders on the call: James Stratton who is at Harvard, a pre-doctoral Fellow looking at the economics of poverty; and of course, Holly Ransom who is a Fulbright scholar who is looking at the translation of policy in the innovation space. Their ears would have been ringing. So many others on this call, whether it’s Tony Surtees, or Tim Boyle at ANSTO, there are many people who like me, spent the entire presentation nodding their heads because we all know, as you do, that Australian’s want to retain a high standard of living, and know that in order to do that we need high paying jobs, and the companies that produce these jobs, and the skills to produce these jobs. 

We asked many of the visitors today to send in their questions, and of course they responded with good ones. You’ve addressed some of the questions and I’ve now consolidated the rest. So let me begin. Given the recommendations in your book and other work around revitalizing the US manufacturing sector, I have two related questions from Mark Burgess, CEO of Quickstep Holdings and Dr. Cori Stewart, the CEO of the Advanced Robotics for Manufacturing Hub. What do you see as the key factor behind the recent increase in manufacturing as a proportion of GDP in the US? And what’s been the role of the Manufacturing Innovation Hubs in the US? Are there any lessons for Australia?

ANDREW LIVERIS AO: The way to stimulate in essence, the centralist way the US approached in essence a revitalisation of the US manufacturing economy. I remember well, back in the early stages of the Obama presidency as the GFC unfolded and all the stimuli we’re being developed such as infrastructure stimuli that happened here. I remember very well the discussion from his team about appointing a manufacturing za. I think that came from Obama’s own background even though he got much maligned being a community organiser and somebody who had not been in the Legislator very long. He had grown up in Illinois and it was one of those quintessential manufacturing midwest states. I was in Michigan for all those years and I know Michigan and Illinois and Ohio and those states across the great lakes we’re the centrepiece of the industrial economy of America, and Obama understood that the industrial economy, you just have to drive past on I80 through Gary Indianna to look to the right towards great ;lakes and see those rusting steel mills, and understand that the 20th century in the renaissance of America in the industrial economy, stimulated by the 2 world wars, WW2 in particular. He understood the jobs were disappearing, that their jobs were bleeding away to NY and the financial sector. 

I gave a speech at Wharton Business School while my son was attending there, my eldest son, and it was a full room of Wharton MBA students and I asked them the question, I said, who of you are going to go and join a manufacturing company and I think one hand went up out of maybe 2-300. Then I said who of you is going to join a financial services company in NY. And pretty much all their hands went up, then I said ok let me explain to you why that’s a false choice. My financial friends don’t like me lambasting their part of the economy, their part is very critical, but what President Obama understood, and what launched the manufacturing task force that he formed, that I co-chair with Susan Hock, the president of MIT, Susan Hockburg excuse me, Susan and I co-chaired and we immediately got the charter from Obama to say look, I understand we’re losing these jobs, I also understand that we can’t tilt the country to just have financial jobs on the east coast, entertainment jobs on the west coast, the great middle of this country is losing, and their kids are losing opportunities. Michigan became a net exporter of people as the sunbelt statues and the southern states built up their automotive base for the 20th century. 

What we did was we said, look, we need a collective input here. We spent 9 months getting input from all the sectors, making an inventory of what the issues were, and it came down to a failure of inputs and a failure of public funds to actually be deployed against sectors that were 21st century sectors. The ecosystem that created Silicon Valley, which was basically gradual and it created itself, was its own organism, but the centrepiece of that was Bell Labs and Lawrence Livermore Labs, the public funds. Public funds that actually stimulated inventiveness for Hewlett Packer and Fairchild to create the major companies that finally came out of there, Steve Jobs and everyone else. That ecosystem occurred over a couple of decades, Boston corridor and the Cambridge corridor in biotech is the next best hub that was created. Also, organically out of MIT. 

What we did was very simple, and it worked. How can we take government funds that are already being deployed out of the department of defense, department of energy, other government departments? There’s a lot of money being wasted by being directed to many things. Let’s look at the 21st century needs, 3D printing, advanced sensors, advanced analytics, lightweight materials, batteries, solar panels, why isn’t the US inventing things? Well, we have to redirect those funds. Second, do our kids understand where the careers of the future are? How do we help our workers get re-skilled to the jobs of the future, what are we doing about that? Let’s redirect some government funds to our community colleges and retool the curriculum to reskill our workforce, to help our kids understand that a 2 year technical career ala Germany is as important and as rewarding as becoming a junior analyst at some bank in NY. We put that in place. We have the unions involved, and academia involved.

On top of that we did the one thing that Australia has always been loath to do, we actually defined the sectors. Didn’t define the companies, but defined the sectors. By defining the sectors, we’ve put in place 11 innovation hubs, opened the hubs for business. Said the the private sector, hese a dollar of government, you put in your dollar, create the partnership, share the IP and scale from there. And if you build it they will come. Those 11 hubs today are thriving, small, medium enterprises, as much as large enterprises have joined. America is scaling in these technologies at a rapid pace. Of course that podel was transferred to the Uk with catapult, with Ireland, India has it made in India, every country in the world is doing it. Ours has been slow to get it done.

MARIA MACNAMARA: Thankyou, we’re hoping that that’ll accelerate. The COVID19 crisis has reshaped our focus on supply chains. We have questions from Catherine West, an independent non-executive director with Nine; Tim Boyle, the Director of Innovation & Commercialisation, ANSTO; and Daniel Rodgers, the CEO/Founder of Omni Tanker. From the manufacturing of PPE, to identifying the specific products needed strategically by Australian manufacturers, what are some effective ways Australia can develop these capabilities? Could innovation precincts assist with this? 

ANDREW LIVERIS AO: The answer is yes, of course the Ambassador to the US, Arthur Sinodinos, a great friend and a great thought leader in innovations paces. He was around as industry and innovation minister between him and his predecessor, Ian Macfarlane, they created the growth centres and the CRCs, we have these instruments in the country that look like, feel like, sound like these sector based innovation hubs that I just described. The COVID crisis has brought in a phrase, maybe 2 phrases, they are very similar, national interest and sovereign capability. Those 2 phrases were the enigma of free market terms. I always found it very odd that the CEO of a capitalist based free market company like Dow would actually ask for government help on creating the rules of the road on what a free market actually looked like. In the book I said, and Obama embraced this, and president Trump embraced it, there was no such thing as a free market. If it wasn’t obvious to all 5 years ago, it should be obvious right now. China subsidizes everything, China steals everything. Am I clear? What are we afraid of here? It has to be ours, it has to be protected, it has to be sectorial focused and things we do well. What do we do well? What does this country do well? If someone answers that question by saying dig things out of the ground, ship them overseas, grow things on the ground, ship them overseas, become a tourist hub, they’d be fun, the answer is yes we do all of those things well. Education, we do that well. But we also invent things. This is the greatest story never told. The country is full of inventions. My own survey I did last year when I was coming back to look at what I could do in the VC space, I was stunned at the productivity of all our universities, our CSIRO, Main Sequence Ventures, you know this from your own dealings. We do invent, what we’re afraid of is scaling against competitive advantage. 

How do you get scale? There are countries all over the world who set up competitive advantages by buying local. “Buy local” means you have to have capability in your procurement. Whether it be in defence, Megan Clarke I know you’re on the line, in Space, in agribusiness, in medtech, in energy renewables, recycling, you have to have in your own procurement this notion, i’m going to qualify my local capability. If it’s not there, I’m gonna find a way to get it there. If i’m spending government funds over here, R&D tax clearance, entrepreneurial funds, why don’t i focus it on those things that I already buy from somewhere else? And if i throw on top of it the thought, guess what, I have the primary input, the rare earths, the titanium, the natural gas, the ability to make green hydrogen, I have that here as well, the food products. If i put the value add step on top of the inputs, I put the technology base and the entrepreneurial skills at the centerpiece, i direct the public funds I’m already spending to those sectors, then I can scale by buying Australian and then on top of that I can create these precincts as special economic zones. I can incentivise them to ship overseas. I can become the technology provider to the world, I can mimic the four tigers of success of the 20th century by creating the technologies of the 21st century that are not price based, not labour cost based, but IP based and quality based. I can do it in this half dozen areas where I’m already very good, and do the scaling from here. I can use the digital supply chain to my advantage. The world of digital has in fact made it easier to connect the markets. That’s the recipe, and as far as i’m concerned, sovereign capability and national interest should be at the core of it.

MARIA MACNAMARA: It relates perfectly to the next series of questions. Australia has tried to focus on specific industry sectors where we have or where we want to build a competitive advantage as a nation. But how do we ensure that the sub-sectors are sufficiently niche to really create competitive advantage for Australia? Richard Umbers from Kaufland; Peter Vaughan and Jeffrey Lang from Melbourne-based additive manufacturer, Titomic;  and Andrea Koch, a director of the National Farmers Federation ask about the prospects for sustainable resource management, green advanced technology, and development and manufacturing of digital agricultural technologies (e.g. robotics, sensors). Do you think Australia can double down its focus on areas like these or are there other sectors? Of course we have here David Griffin from Sun Cable, there’s the whole question about energy which I know you’re very close to.

ANDREW LIVERIS AO: Those questions are a great series of questions. If I can’t go back to my US experience and I think it’s immediately transferable here. Once you jump over the fence and say, sovereign capability, national interest, jump over the next fence, look at sectors where i can compete globally, i’ve done my inventory, i’ve done all the work, all the submissions, I know where we are good. Then you jump to the next step, where are the holes? Where do we lack that value-add step? I’m good at aluminium castings, not at titanium, to use a live example, someone on the food will identify with, i’m good at selling basic agricultural products, I need to get more packaged proteins shipped. Another example that was live that we used. There are many holes in our ecosystem if you pick a sector. Then you have to say, what’s the competitive advantage I have by actually going after that piece of the sector. I recommended, and did something very strong around all of the things we’re doing to get iodinated like the US, UK, New Zealand, Taiwan, Malaysia all do this. 

There’s a body that needs to be coordinating all this and measuring success because again, it’s something to create the body, another to give accountability to actually see the things get done. I used to discuss at Dow the Four Ds, and getting to the 5th. You can probably guess the 5th already. There was a period of time when it was so successful, anyone who criticised us would be defensive, we’d say, they don’t know what they’re talking about. Well, graduate to the next thing, which is, Ok, maybe they do know what they’re talking about, let’s stop being defensive, let’s actually debate. Then let’s discuss, then lest get into a dialogue. All of that was great. Until you do something, actually, that’s all it is. Another report, another committee, another acronym soup. What is the industrial policy of this nation, these sets of conditions that are laid out in my opening remarks. Because guess what, the next crisis is around the corner. How do we build resilience, how do we build jobs that will survive these crises, that are needed. How do we ensure our supply chains don’t get disrupted so our citizens can be protected. These jobs will be there, manufacturing does stay through a crisis. How do we get the inputs, the people skills, the right policies in place, including energy policy you touched on, how do we put them in place now? A group of people in place that track these sectors and then inside those sectors, how do we actually encourage the value add steps we can do here versus import from somewhere else. How do we do that? Is it just 6-7 sectors? No. Lets focus a lot of our activity on the ones we can win at, but not neglect the other sectors as well. Let’s be careful, not spread the vegemite equally on the toast equally at the beginning. Let’s make sure that we get the sectors we can win at right, then go on and figure out how to help other related sectors. That would be the way I think about it.

MARIA MACNAMARA: So that leads us to this next question which touches exactly on what we’re talking about just then. As we contemplate the options to prepare Australia to proposer of the next 30 years and it’s time for you to pick some winners, where do you think we should focus? THis question comes through from Roy Green, who’s the Chair at Port of Newcastle.

ANDREW LIVERIS AO: Roy knows well, it’s a rhetorical question, so I appreciate that Roy can answer his own question as much as I can. You have to look at the things that the country does well already. They are well discussed, well described, most of them have been around a while. Food and agri tech, mintech and rare earths, energy and renewables, throw on top of that recycling. If you look at medtech and what we’re doing in pharma and the pharma ecosystem.. Space, what can we do in the new sector called space. Underpinning all of them, we need a capability toolbox centre of excellence. The modern toolbox in the tech area particularly, all things digital. I’m a great believer that digitalisation will give us an opportunity to change the factory of today to the factory of tomorrow. A great example of that, we looked at through this work we just finished is what the people at Dulux have done with their new paint factory in Melbourne. It’s a state of the art modern facility, high tech workers, the actual aggregate technologies, can actually customise and automate and feed in data to serve customers. That’s an advanced manufacturing toolbox that enables them to do that. The country needs access to that across different sectors – we need to actually aggregate that and provide access to it for all of our companies, in particular our SMEs. Australia does have a lot of great small companies that are trying to become medium. They just need that extra push, the extra help, the access to the right funds, the access to the right toolboxes, and so we need to actually find a way to overcome those. Advanced manufacturing underpinning those sectors is where I’d start.

MARIA MACNAMARA: So you just mentioned about the access to funds and opportunity to grow those midsized companies. Mike Zimmerman, a Partner with Main Sequence Ventures; and Miguel Carrasco, a partner with Boston Consulting Group, asked about these opportunities. Should Australia focus on increasing government and business spending on R&D (and raise it from about 1.8% of GDP currently, towards the OECD average of 2.4% of GDP)? Should Australia focus on attracting international talent and businesses, and take advantage of our relatively low Covid numbers? With that I’ll just mention we have 300,000 Australians who have returned since the government asked them to, of a total population of a million overseas. There’s quite a lot of talent. The second part of that is how do we keep them here?

ANDREW LIVERIS AO: That’s the crisis opportunity point that Warren Buffett talked about. I’ve been asked the question, written an op ed on it. Read Claus Schwab’s book “The Great Reset”, the founder of Davos and World Economic Forum, has access to massive amounts of world leaders and global opinions and so he doesn’t do things lightly. I looked at what he wrote, I certainly have my own opinion, and my opinion is we’re not going back to what we had. Now that doesn’t sound scary to me or Warren Buffett, it sounds full of opportunity. It really feels like we’re in a redefinition of how humanity operates. That means within a nation, you actually have to reset and really think through what your capabilities are and then deploy against the skill base you have. Find a way to get your funds to work with those skill sets so that’s all the things I’ve talked about. Play into that playbook.

A couple of things that you just asked in that question have to play as well. What about our super funds? Why are they sitting there in safe instruments, only safe instruments. We have one of the largest sovereign wealth funds in the world not being deployed. Because we did it back in the 90s and Paul Keating feels strongly about it, I respect that, but that’s the 20th century. We’re in the 21st century. How do we actually mobilize and create one of the biggest VC communities in the world here. How do we get some series A, series B funding rounds done then go and recruit that talent you just talked about. The talent that’s returning. Our scientists, our engineers, our Lawyers, our people involved in academia. How do we create these clusters that are talked about, these hubs you just mentioned. Let’s create the Silicon Valley environment I referred to with the midwest. Those 11 hubs that are now thriving with entrepreneurialism. How do we take the R&D spend we currently have,a dn you’re right it’s roughly 2.5 billion a year, how do we focus it? Yes increase it as required. Again, one person subsidy is the other person’s incentive. Rather than think about it as a subsidy against unproductive activity, focus it on innovation and productive creativity, and then a term I used which we should embrace in this country, which is, “get to know”. Know is KNOW or NO. Failure is ok. Look at the American model. I failed something, I’ll go do something else, I’ll go try something else. I push that button, I learn from that. We have to get into a thriving ecosystem of destructive innovation by attracting the money to more risk based activities in things we’re good at. What I said in my opening remarks, we are stunningly good in some areas. I mean, just choose the Melbourne Corridor in MedTech as an example. That’s world class. I heard a presentation the other day on why Australia imports 100% of its finished drugs. Why do we? Is it a lack of capability, no, is it a lack of funding, no, what do we need? We need a world class CPMG manufacturing capability in this country. Ok let’s take some of those government funds, let’s get the technology providers, let’s form a public private consortium and actually employ these people, and let’s go build it where it needs to be built to create employment for next gen Australians. Let’s encourage the ecosystem of getting our workers like Dulux tooled to operate a facility like that. I mean, Ireland did it, Israel did it, so I need to embarrass us here a bit, I mean come on. Those are great countries, but we can do it.

MARIA MACNAMARA: We can absolutely do it, and it doesn’t scare many of us, in fact it gives us the hope and the opportunity that we’re all looking for. I’ll open the floor to questions in a moment so if you have a question, either use the emoji on the bottom right or put your hand up and one member of the team will send me a note. What is interesting is this constant debate between we’re great at R&D and lousy at commercialisation. We start to look at why that is. I’m starting to wonder if that’s because we don’t do any product development here because we have a lot of sales offices of global multi nationals, but not R&D facilities like they have in Israel or Ireland. Maybe that’s a question to ask. And the other issue is now, with COVID, we are COVID safe for all intents and purposes, we have 3 or 4 states and territories that have no cases, that in itself is a tremendous opportunity for the nation to attract the product development, because you don’t have to hibernate in your house and you can go to work. I’m wondering what you think about both of those elements?

ANDREW LIVERIS AO: you don’t have production here of any sort of scale, the chances you’re going to get the design or the prototype or the application of the product are low. So where we lack critical mass is exactly that. I happen to think one of our major failures, and it’s rescuable but it’s not one of the sectors we’ve picked on because it just is too hard from here, but it’s not impossible is, automobiles. We should never have let our automobile industry die here. We just kept funding the wrong part of it. Supporting the assembly using technology from overseas. Yet all the work being done in lightweight materials, the carbon fiber project in Victoria, all the work in engine design and efficient engines, then dare I say it, EVs, why aren’t we world class in EVs already and in batteries and in battery materials and next generation batteries? We think we want a 100% renewable future, which we do, I’m a firm believer that we should be focusing on those activities immediately and actually creating the sectoral work that gets us there. This application development design point you’re making is the reason we don’t. It’s really hard to start from 0, or small to actually learn what customers want, to get the application side, or design against that learning so you can feed the loop back. In the book I wrote, “Making it in America”, there was one whole chapter, the China story is well known to all of us. I’m going to track all the foreign capital, make them build R&D labs, steal from their R&D, and I’m going to migrate from quantity manufacturing to quality manufacturing. They have a domestic market so they can hold us hostage. Australia can’t do that. Australia, like Israel, Singapore, Ireland, attract FDI to put the shop floor here, not for Australian consumption alone, but for obvious exports. We can attract FDI. Not just an isolated example like a Boeing or a Siemens or an ABB or a 3M that think about coming here. I can guarantee you that for most boardrooms in the world, Australia is an afterthought. So, who changes that? It’s not their fault. We’ve got to become huge ambassadors against our attractability. Once we develop what that attractability looks like – and that, frankly, is the work in front of us – it will make us impossible to ignore. Impossible to ignore.

MARIA MACNAMARA: I think David Griffin is doing that with SunCable. I’d be really interested to hear David how that’s going and what hurdles you’re overcoming to make it possible?

DAVID GRIFFIN: What we’re developing is a really complex system, we’re not developing, we happen to be developing the world’s largest solar farm, the world’s largest battery and the world’s longest HVDC transmission submarine cable system. But the emphasis is on the word ‘system’. It’s a 4500 Km long machine and millions of potential design decisions to be made to work out what the optimum design is, the optimum means to operate that system. Manufacturing keeps coming back as a major influence in every one of our design decisions and the optimum design of the system because there’s three main technology components we’re dealing with, solar, battery and high voltage direct current technology. Within solar technology we’re in a fortunate position, we’ve already made a decision about the technology we’re going to utilise, and that’s pre-fabricated solar farm technology called Mavericks, designed by an Australian company, 5B. AES from the US, one of the largest utilities in the world has announced a major investment in 5B, and they’ll be using them to roll out 1-2 gigawatts of mavericks per annum starting next year. That’s a major step forward, taking an Australian design and turning it into a massive scale of production. We also want to ensure we have sufficient production capability for that solar component. We’re developing a semi-automated factory in Darwin for that purpose. Then we have the battery technology – it’s an incredibly dynamic area. We’re not going to face manufacturing shortfalls in terms of the amount, even though it is the largest battery in the world, there will be ample manufacturing capacity for that. The bigger challenge we have is we know for a fact that it’s such a dynamic market that the batteries we install at the start of the construction process will not be available at the end of the construction process 4 years later. 

One of the biggest challenges we have is the global manufacturing capacity of HVDC cables. There’s lots of ways we can address that problem but it is front of mind in terms of one of our biggest challenges. Balancing the optimum design and knowing what global manufacturing capacity is available for the particulate types of cables we need. There’s a real focus on manufacturing capacity in Europe. There’s a lot of demand increase for these cables and naturally those incumbents want to expand their manufacturing capacity by expanding their existing factories in Europe. We’d really like to see cable manufacturing capacity in high voltages in our region, and in Australia in particular. It’s a lot, but this is one area that’s really challenging in that we need to utilise very high voltage cables and it’s probably not possible to go and start a new factory that goes straight to the world class, the highest voltages available. It’s probably something that takes 10-15 years to work up to get to those voltages, a lot of long term planning. Fortunately, this is just the first of our projects, I’ll be working on this for the rest of my life, building networks across the world. I’ve got time hopefully.

MARIA MACNAMARA: Thank you, it took 25 years for the Snowy Hydro, you have plenty of time. Mirjana Prica, you had a question to put to Andrew?

MIRJANA PRICA: Andrew, everything that you talked about, absolutely made sense and i congratulate you on talking about the triple helix, or the quadruple helix, it’s well known around the world, there’s benefits of working together, you’ve talked about what we need to do in terms of governments, enterprise, really across the whole ecosystem. I suppose we need leadership to do that, and I’d like you to touch on it. You touched on leadership in your opening remarks, and the question is, we need the leadership now to steer us through the unprecedented times of volatility and as you said, it’s changing constantly. So the question is, how do we make the leadership happen. How do we address the lack of leadership at all levels? How do we get the machine moving to actually make things happen?

ANDREW LIVERIS AO: A really great question. One I spend a lot of my life thinking about. You can get really philosophical: do leaders get born or created? If you veer on the side of the topic that they get created then all of us have an opportunity to learn how to lead. The sum of all of our experiences gets us to a point where leadership is something that is demanded and asked of us. When I talk to young people – I have an academy that I’ve invested personally in at my alma mater of UQ, which gives young university students, engineering graduates, but not just engineering, a chance to learn leadership by case studies and practices . We are way passed content-based leadership; we need context-based leadership. The rapidity of change in this VUCA world means that the attributes of leadership such as agility, being able to pivot, being able to adjust. I use the analogy of flying a plane, and you look at the horizon you’re flying to, but you also look at the instrument panel in front of you, you have to move your head up and down, keeping the long term perspective in mind. We have to teach that for our next generation of leaders. What I’m afraid that’s happened is, the infection of short termism has invaded all leadership positions, political leadership, business leadership, very few of our institutions now have in place leaders who are really thinking long term. I challenge you to give me a political leader that you admire that’s put in place long term strategies for their one country. My answer to my own question is Angela Merkel who’s probably one of the last, although I’m very encouraged by Emmanuel Macron, but most of the rest of the western world is occupied by short termism and short term leaders. How do you actually develop this next generation of leaders, how do you accelerate them, get them into position. To all the young people on this call, and to all the not so young like me, I think we have to decide to get ourselves into public service. I do think the greatest thing we can do is certainly ask for our military and our services, but we are all in public service. We are all beneficiaries of all the decisions before us, all the things that happen before us, got us to this point. The next generation, the 50 years in front of us with the Sun Cable project, David said he’ll spend his life on it. God bless him, we need people like him to put huge amounts of intellectual capital and personal courage and leadership in the hard to do bucket. 

To do that, public service becomes mandatory, you have to decide whether you want to become someone on your local city council, or run for the highest office in the land, it doesn’t matter, whether you’re 25 or 65, it’s our time to serve. If we don’t make these choices and the situations that are in front of us, we’re relying on crutches that don’t exist anymore. The institutions – WTO, WHO, UN, UN Security Council – name them all, name me an institution that is able to handle these current situations in this current world that we’re living in. They’re not there. Rather than yelling, screaming at each other all the time and ultimately leading to the conditions that lead to anarchy and social unrest, rather than tolerate corruption, and bad governance that leads to explosions like the one in Beirut, this is not what humanity needs. It needs leaders to step out of their comfort zone and go in and nominate themselves for public service, and lead. Lead based on values and lead based on the right thing to do which may not be the easy thing to do. Be inclusive, not exclusive. Use 2 ears and one mouth not one mouth only.Be learned by learning fast and then deploying. Get into the doing. Vision, strategy, purpose and hard work. Maybe I’m preaching things you already know, but I think the drive to get leaders in place has never ever been stronger.

MARIA MACNAMARA: I think you’re saying what we need to hear. For those who are in the service of the public on this call, whether it’s military or public, a huge debt of gratitude for the amount of effort and energy that you put into it. You have an opportunity Andrew with Martin Parkinson working on the Northern Territory project who’s now chancellor of Macquarie University; and Eric Knight who’s coming in as the new Dean of the Executive Dean of the Macquarie Business School to reshape what that leadership framework looks like. We’re running very close to time and I know that Doug Ferguson has a question.

DOUG FERGUSON:Thanks Maria, Thanks Andrew. Your point around the special economic zones is fascinating, I’m wondering your thoughts on the necessary changes to visas and taxes that would attract not only individuals, expats back to Australia, also highly prized talent, and capital. 

ANDREW LIVERIS AO: Thanks for the question. I might be losing the podium here in a second based on what Maria just said. I just want to make sure, not only do I appreciate the questions that we’re asked, but if there’s more, please Maria will find a way to get them to me. I also recognise that the leadership question, it’s hard to get some of this done so I want to double down on Maria’s point. Praise the people who are in place, doing what they’re doing, the response to the crisis has given us this opportunity. Australia should be very proud of what it’s achieved, we beat ourselves up a lot, maybe it’s the national character. We have it so good we maybe take it for granted sometimes. It doesn’t happen naturally. Our leaders have stepped up and acted quickly, it’s given us this wonderful opportunity to put in place attractions, incentives, and a toolbox for the 21st century, to build the next economy for the country. It’s an opportunity that shouldn’t go to waste and I know Roy is going to talk about that in a minute.

ROY GREEN: I’d like to acknowledge Arthur Sinodinos and our entire world wide audience, all of whom are passionately committed to Australia’s reinvention and our future prosperity. We’ve been extremely fortunate and privileged this morning, our time to have someone who’s uniquely qualified to reflect on our changing world economy, on the role of institutions, of corporations, of universities, of government and the role of innovation in not only defining that future but overcoming what I think we would identify as an historic complacency despite all the talent that we have in this country. Perhaps that’s a legacy of the mining boom. One thing we know however is that everything is now changing and many of the forces that require us to rebalance our economy are being reinforced and accelerated by the current pandemic and all the associated economic consequences of that. It will encourage us to think very carefully about what Andrew has been saying about the need to rebalance our economy away from an excessive dependence on unprocessed raw materials and other single products to a much more complex … inclusive, dynamic and sustainable knowledge based economy in which manufacturing can be the growth engine. This is … in an interview that Andrew gave a day or so ago to the Australian manufacturing forum, he lifts our sights as well by saying, why can’t we triple the share of GDP of manufacturing which is currently around 6%. Why can’t it be around 18 or 20% as it is in Germany, Switzerland and many other advanced countries … both in terms of that share and indeed in terms of the complexity of our economy. If we measure it by the diversity … we can … research without the skills but we are able to … as Andre says, what we do need is a 21st century industrial policy and that’s something that we hope results from his report when it’s published and reflected on by government, and to the extent that there is delay, and there shouldn’t be, this discussion I see has been recorded … and i would suggest to Maria that she places it on continuous loop in all Government departments and ministers offices. Thankyou Andrew.

MARIA MACNAMARA: Thank you Roy, and the final word goes to our partner, David Robinson, co-founder of Internet 2.0, one of Australia’s fastest growing national security focused technology startups. David is a retired captain of the Australian Army intelligence core, having served on active service in Iraq and Afghanistan.

DAVID ROBINSON: Mr Ambassador, Andrew Liveris, Roy, distinguished guests, ladies and gentleman. My career to date has been focused on protecting and defending Australia’s national interests. When I retired from the Army I saw my contribution and it was purpose driven – securing Australia’s future prosperity, and together with my co-founder we created Internet 2.0… so that only the people listening to you we’re those you chose. To prove our product we worked and successfully implemented it in PNG and now we can roll it out anywhere. As a quick anecdote, Papua New Guinea has the most expensive internet in the world and only 11% of the people are connected to it. This country was part of Australia until 1975, a new independent country, with a lot of ambition which is just being left behind by the digital economy. So we invested, we saw the opportunity as it was, we are entrepreneurs, and we backed it to the hilt. Like any startup, we manufacture the product ourselves, as demand has grown, so have our ambitions, and we’re ready to establish a manufacturing operation in Australia with a challenge and opportunity that creates. We manufacture it every day and build all this equipment and take what is a huge server into something small and affordable where cyber security can be deployed to anyone and at any cost. That is affordable for small business, the real estate agent or the home office as we all have now. We can do this in less than 12 months, then others can pick up the signal offered by Andrew Liveris and build an advanced manufacturing capability employing Australians. Maria thank you, it’s been an honour to show our support for Advance by working with the team to bring today’s program to you. Thank you everyone.

MARIA MACNAMARA: Thank you very much David, thank you Andrew, Arthur, John Berry, Megan Clarke, and every single person on this call for taking the time to start the day with a positive message. We will prepare a summary, it will be out by the end of the day, we’ll seek permission to release any bits of the recording he’s happy for us to release. We hope to continue this conversation, Australia’s best days are ahead of it.

August 2020