June 2025
(Based on a report to the Australian Government)
“Our children should learn the general framework of their government and then they should know where they come in contact with the government, where it touches their daily lives and where their influence is exerted on the government. It must not be a distant thing, someone else’s business, but they must see how every cog in the wheel of a democracy is important and bears its share of responsibility for the smooth running of the entire machine.”
– Eleanor Roosevelt, US First Lady
“Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.“
– Ronald Reagan, President of United States
I’ve just completed the latest round table and innovation panel with federal government. It roughly happens every 4 years and if I’m honest, I’m not 100% sure how I’m on the panel. I just randomly get a phone call every 4 years that the country needs my advice and then suddenly my next few weeks are occupied thinking about policy problems and solutions that I’ve seen or experienced first hand. They seem to be getting value and so I keep on doing it.
It is very satisfying to highlight big problems within an industry that have simple or elegant solutions, then watch those solutions actually get implemented down the road. If you apply the exact right amount of force at this moment to remove this piece of red tape, it’s like unlocking a dam of water that then torrents forward into economic activity. Then future people show up in that industry never having known how difficult it used to be to do what they are trying to do right now.
I lived this experience. When designing Melbourne’s free tram zone. The whole thing just needed to be refactored from the ground up. It basically paid for itself by cutting the number of tram inspectors down from 600 to 30 while keeping the fining rates the same by optimising where they would be stationed at the entry and exit points of the CBD. Then you could make the whole CBD within that square free.
The unintended effect, the proverbial dam of economic activity that was unlocked, suddenly the City of Melbourne was getting a higher velocity of spending in the CBD. Tourism dollars, expenditure, everything. Because it was suddenly free to move so people wouldn’t think about crossing the city to spend money anymore. Everything went up, across the board. To the tune of half a billion dollars per year of more economic activity from something that was basically free to implement. Which directly turned into more tax dollars.
Until you’ve lived this, it’s hard to appreciate exactly how many dams exist secretly hidden in plain sight within an economy. So what I’ve always viewed these government panels as is getting experts to highlight the location of the dams and then explain how to unlock it and harness all that energy. To a policy maker whose job it is to maximise the impact of that energy. Because they want to grow the economy and tax that growth for the good of society.
These were the suggestions I made this time. But this time, I wanted to do it differently and instead reach out to everyone I know to ask them for suggestions instead. Mainly because I didn’t have any immediately good ideas but also because I wanted to see the wisdom of the crowd and to litmus test my own ideas against people wealthier and more experienced than me. To sort of prove to myself why I’m even here or asked to do this to begin with, instead of someone better. But also to convert pent up potential energy within industry into activated energy.
Suddenly I was reading hundreds of suggestions from leaders of industry and seeing first hand the kind of insights generated from lived experiences working in it. And I learned a lot about why this is so hard to do to begin with. Being a government is super hard. When you ask a population for advice on what to do, what actually happens is the noise to signal ratio goes completely out of whack. Here’s what happens and by writing this I’m hoping it helps people get better at engaging with government to get better outcomes.
What is a Government Trying to Do?
I think most people assume governments are bad at governing and that they can do better because they don’t realise or understand just how hard it is to lead and achieve things on a macro level. Let’s assume a Government is a business, a type of 2 sided marketplace, taxes are how it makes revenue, policy is how it spends that revenue and it’s main product is the society it creates for its citizens.
A society fundamentally is a system and what the government does via policy is make the rules within the system that the participants have to operate within. Governments want to make society better for people living in the country. Long living, high income, low unemployment, high happiness, low corruption, low crime societies. That is its main product. Then people can choose what “society product” they want made by which government by deciding where to live in the world.
Generally speaking, I think Australia has an excellent government that is very effective at achieving its goals. People complaining about it only have to look overseas at other countries societies and governments to see just how bad it can get. Most people who live in Australia would say they like Australian society and think it’s high quality, but they don’t realise within that phrase they’re saying how much they like the government. Even if outwardly they’re complaining about it. Because the society is the product of the government.
So when a government asks industry for advice, what is it trying to do? It’s trying to improve its product by making its society better. How does it do that? By achieving it’s primary goals. What are those goals? If you had to break it down, the government’s primary goals are the following and it’s asking industry for silver bullet solutions on how to do all of it at the same time.
1. Increase taxation revenue.
2. Reduce spending.
3. Remove red tape.
4. Avoid rent seeking.
5. Stimulate economic growth.
6. Increase employment.
Concentric Circles of Consensus
Imagine if you put 100 people in a room together and your goal was you have to get them all to agree on the same thing. That’s what a government is. You ask the whole room the same question, what you start to see happen within the answers is patterns emerge. The complexity and nuance gets lost and people start to agree with each other until you develop a sort of group think and overlapping of ideas. They sort of start to form into fund X, cut tax Y, create body Z.
But here’s the problem. If there are concentric circles within an idea space. It’s because there’s a reason that system is running like this. It’s not an accident. It’s because that answer has some second and third order effect to it that the people coming to the conclusion haven’t thought of. This is why I think round tables are so ineffective generally. Because the conclusions people reach are precisely the things that are not good ideas to implement. They just don’t realise it.
Let’s use a really simple example of an idea I read repeatedly. Let’s say you think X is important and that the government should fund more X. X in this example can literally be anything, AI, Crypto, Startups, Code in Schools, Technology et al. Funding for X is a subset of ideas that people come to. This statement seems harmless and like a good idea. X is important, of course you’d want to fund it. It would be great for industry if we had more X. But what you’ve unlocked here is a Pandoras box of actually why government doesn’t do this. Here’s why.
Where is the money going to come from to fund X? What is the mechanism by which that funding will be administered? What checks and balances? Who administers the funding? Does a new body need to be created and staffed or can an existing agency be repurposed? What capacity does that agency need to do this? How will that agency run and where? Who is going to receive the funding? Are there rules for how they spend it? We don’t want people getting government money and then buying a yacht for example.
How do we verify it was spent appropriately? Who verifies the expenditure? Bad actors will be trying to game this system to take all that funding dollars. How do we stop them? Is rent seeking allowed? Is there a punitive mechanism built into it for wasting the money? By what heuristic do we judge the money well spent? What is the enforcement body? How will they enforce? What else will have to be cut to free up the capital to fund it? So on and so on.
That’s the problem of macroeconomic capital allocation. You can’t just create funding for something without also answering all the second order and third order questions about how it will work and where it will come from. People just assume the government is this big entity with a big pool of money that they can do whatever they want with and spend however they want. But they’re accountable to their population, the tax base. So every dollar spent has to have accountability to it.
I’ve often seen technology people come forward with big sweeping statements like if you spend N millions or billions of dollars on X, you’ll get Y. But it’s not that straightforward. Whenever I read things like that, I always think the writer is just inexperienced when it comes to dealing with government and they’re not allocating their time appropriately. They’re better off asking for that money to come from all the rich people they know rather than the government, they’d have more luck.
Because it gets so complicated, I’ve found the government just doesn’t want to spend more money and is why when people show up with suggestions that resemble funding for X, it almost never happens and they don’t get invited back. Because it’s layers and layers of complexity. The best solutions in fact are the ones that come self funded. So when dealing with government, whatever suggestions you come with, make sure it’s either free to implement or is self funding. It increases the probability dramatically that it will get implemented and turn into law or policy.
Second and Third Order Effects
Designing systems is hard. Within any system comes a lot of rent seeking behaviour or regulatory capture where individuals or companies utilise governments and regulation as a means for personal enrichment. By unlocking opportunities that only they can capture or by making it more difficult for others. This is generally a bad thing unless those individuals bring a lot of capital themselves to fund whatever they want to do.
It is for example a good thing to give a big mining company rights to land if they’re going to spend billions of dollars themselves digging up all the minerals. It’s a bad thing if you have to fund the digging as well as giving them the land. But with that example, you at least know what will happen. Often times with funding, you actually don’t know because there are unknown unknown second and third order effects.
Here’s a question to ask yourself when you think of something the government should do. Is this going to do what you think it’s going to do? There are dozens of examples where a policy was introduced and then had extreme unintended consequences, often the opposite of what was intended.
A great example of this that you used to see was to teach coding in schools to children. The assumption there was that it would expose more kids to math at younger ages and therefore create more engineers when those kids grow up. But now we have research that shows if you expose kids to too much math it actually turns them off the subject entirely.
So what would have been a great 30 year old engineer decides at 10 that because he doesn’t like engineering at 10, he never will and doesn’t pursue it in high school and then not at university. So what we wanted was more engineers and we thought that teaching coding in schools would get that, but that might have actually gotten us less engineers. We can’t say for certain that it did what we thought it was going to do.
The first time I ever did this government innovation panel is precisely because of this phenomena. My first ever recommendation was to try and unwind a tax that was introduced on equity based compensation. It was intended to hit the big banks and stop them from giving low salaries but large equity to bank executives. The equity was hard to tax and so they introduced a tax for it.
The unintended consequence? Crippling technology companies abilities to give equity to employees because they would now also get taxed and stifling innovation in tech for over a decade. Thankfully, we managed to get rid of this tax. But what was meant to hit the top end of town accidentally hit the bottom end of town.
So the advice would be when dealing with government, think things through and make sure there are no devastating second and third order effects within a recommendation. Or to bring things that are so simple, it’s almost not possible to have any unintended effects. This is where as a rule I like to subtract rather than add. If you add new things, it might add unforeseen things. But if you take away, you’re reducing the likelihood of additional unforeseen things ever being there in the first place.
I think really smart people are particularly susceptible to this problem. Because they assume their ideas are going to turn out exactly how they think it will. But policy in particular always has unintended consequences. You think it’ll turn out like X but then Y happens instead by accident. Almost by definition red tape is designed to be something intended to be helpful but is accidentally harmful. So I like to err on the side of caution and try to remove red tape. Nobody ever thinks when they’re adding tape it’ll turn out to be red.
Costing is Everything
Everything costs more than you think it will and you’d be surprised how few times anybody runs the napkin math on how much something costs. Let’s work through some examples. Let’s say you decide that universal childcare is a good idea. Rather than just subsidised childcare for low income people like we currently have. This sounds like a really good idea because it will unlock more people to work and then you’d get more tax income from them. Sounds genius in theory right?
So let’s work the math. In Australia there are approximately 1.5 million children in childcare and childcare costs on average $150 per day. So 5 days per week, 50 weeks per year and you have an equation of $150 per day X 5 days per week X 50 weeks per year X 1.5 million children. This policy would cost $56 billion dollars per year to implement. But maybe the gains from allowing the adults to go back to work would pay for this?
Those 1.5 million children are from 1 million families. Let’s say conservatively, by creating universal childcare, it allows 1 adult member per family to work full time on an average salary of $100,000 per year which produces $30,000 of tax revenue. $30,000 of tax revenue X 1 million families and you would generate $30 billion dollars of additional tax revenue. We have now discovered that this policy is underwater to the tune of $26 billion dollars per year. Absolutely no way it will be implemented.
This is a simple example of a step the government always takes when it comes to policy, the modelling. Some department models the scenario to determine whether or not it actually works and does what they think it’s going to. And costs what they think it will and will benefit them in the way they think it will. To verify that all the numbers actually check out. Once every policy is modelled, it turns into a document. And then the government ministers can see each different policy and how much it costs and how much benefit and revenue they’ll get by doing it. Then they can make educated guesses on what they can successfully implement into law.
When you bring suggestions to the government, it is a very good idea for within those suggestions to be the funding mechanism for it. Or for it to be self funded within the idea itself by virtue of cost savings that will occur. And to sanity check with napkin math whether or not something costs what they think it does or will create revenue in the way they think it will do. In my experience I have found unless it has a really big impact that virtually costs zero money to do, it doesn’t happen.
Every single dollar the government spends on anything has to come from somewhere. Often at the expense of another program. So there is huge opportunity cost that pretty much only the government can see. They’re the only ones who know what they’re cutting to spend. This would be helpful for people to understand I think when dealing with government. Run the numbers comprehensively before you show up and make sure they’re self funded.
If you do that, your win rate will go up dramatically. And to also not expect things to move quickly. Because governments are big and slow. There’s usually a big lag of a couple years each time between receiving a good idea and implementing a good idea. I’ve always attributed that to the government themselves investigating and modelling the feedback from industry.
Rewards and Incentives
Here’s an answer to a question that almost everyone in technology wonders at some point. Why does the construction industry and mining industry get so much government funding and support but the technology industry gets so little?
It’s because when the government funds construction and mining, they know exactly what they’re going to get. They know that this funding will create this many high paying Australian jobs in this exact location that they can eventually tax. The outcomes are predictable. With small amounts, if you fund a house getting built, an Australian carpenter will spend a year of their life building that house. With big amounts, if you fund this tunnel, it will create thousands of Australian jobs in this location for years to come.
But if they fund the technology industry, which is location agnostic, is there even any guarantee that this funding will be Australian jobs in Australia which can be taxed? Or might the big tech company they funded hire top American engineers from Google. Or 100 Indians to do the same work instead. Or automate it such that the jobs are done by robots or software. Maybe they headquarter themselves overseas, effectively creating an overseas stimulus package.
The government knows deep down that a successful construction company will stay in Australia but a successful technology company will leave Australia. Because it will want to be closer to larger pools of talent, something that it can only find abroad. That’s why they get less funding and less government support and is the answer to this age old question. Here’s an illustrative example by comparison.
Atlassian is the largest technology company started in Australia with a market cap of $75 billion AUD. It employs 12,000 people. But of that less than 500 jobs are based in Australia. 98% of their employees are overseas.
Metricon is the largest construction company started in Australia with a market cap of $200 million AUD. It employs 2,500 people and every single one of those jobs is in Australia.
Atlassian is worth 400 times what Metricon is worth but Metricon employs 5 times more Australians than Atlassian does.
So is it any wonder why the government wants to support the construction sector instead of the technology sector? With their finite pool of tax payer revenue, they get way more bang for their buck. Way more employment per dollar of support offered. Even when the technology sector wins, the jobs don’t stay here.
Canva is the first global tech company started in Australia that has created a lot of employment in Australia that I can name. They have 5,000 employees and half of them at 2,500 are in Australia. They’re the role model to copy if we want more government support as an industry. When you get big, keep that presence locally.
I hope Canva as they grow continues to hire locally and doesn’t do what Atlassian did. That will speak volumes about what can be achieved if the government creates more Canvas and I guarantee the government is noticing. Canva, by virtue of having a big local footprint, is going to do more to get the government to support technology than most other technology companies ever did.
I can almost see the eye rolls from government ministers listening to the executives of Atlassian talk about the lack of government support for technology, whilst simultaneously offshoring overseas 98% of their employment base. That’s exactly how you burn the bridge whilst you’re trying to build the bridge.
So that’s the advice, keep a big local footprint if you get big. Because it will lay the foundation for future generations to build on for more productive support from government. I bet nobody in government has ever said this to technology executives so I’m just going to go ahead and say it for them. Big local presences with local spending, (that is more than just buying luxury mansions), with lots of Australian employment is how you get more government support and it becomes a flywheel where it builds on itself.