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Transcript

JAMES RILEY: From InnovationAus.com I'm James Riley. Welcome to the Commercial Disco. Join me on a voyage of commercial discovery where we uncover great ideas in deep tech and research. The Commercial Disco is your window on the nation's business innovation landscape. I'm talking to the New South Wales Senator, Dave Sharma. Very well known to this industry, Senator Sharma is the new Shadow Assistant Minister for Competition Charities and Treasury and is a former Ambassador to Israel, which is kind of how he got introduced to us and to this industry. Welcome, Senator.

DAVE SHARMA: Good morning, James. Great to join you.

JAMES RILEY: Let's start. We don't need to dig through the entrails, but obviously it was a pretty tough election. You've just been appointed to your Shadow Assistant Minister role. What does the term look like to you? Where will you be putting your energies? There's obviously a few levers that can be pulled within the treasury and you're a man of ideas.

DAVE SHARMA: Yeah, well, look, I think our task is twofold as a party. One is to make sure we act as a credible opposition. Australia is better off with a strong opposition regardless of who's in government. It improves quality governance and you need scrutiny of everything the government's doing. So our first task is to make sure we're doing the job we're there to do, which is to be in effective opposition. But look, the second task for us is a bit more of a soul searching one, to be honest. And it's to reconnect our values and our principles with policies that speak to the priorities, needs, concerns and challenges that are facing Australia today. And I think, you know, in a nutshell, that's really where we were lucky the last election, last campaign. I don't think Australians saw us as having challenges or even a focus necessarily on some of the pressing issues that they face. And so I think a large part of what we'll need to be doing is a kind of, you know, internally focused policy review, policy formulation process to make sure that we are actually a party that's relevant for contemporary Australia.

JAMES RILEY: Can I ask you then, as someone who has shown a great deal of interest in the tech sector, in startups and all of that sort of thing that we love here. These things don't feature in general election campaigns and I guess that's not terribly surprising. Although to be completely absent in the conversation does strike me as a little odd. Is there something going on here in Australia that's out of step with, you know, our contemporaries elsewhere in the world?

DAVE SHARMA: Look, I think, to be honest, there's a degree of complacency in Australia, which is born off, roughly speaking, 30 years of uninterrupted economic expansion since the early 90s recession, a huge windfall from resource and commodity exports and a sense that government didn't need to focus on challenges like productivity and economic reform and innovation because that stuff all looked after itself. Government was effectively about developing new social programmes and redistributing national income. Now I think we are slowly, I think we've already reached the end of that period, but government is slowly coming to terms with it. I mean if you look at our economic performance over the last three years, it's pretty woeful. You know, productivity growth is the slowest it's been in 60 years. In real terms. People's living standards are going backwards. What are we missing now? I mean there is very little in the way of discussion about innovation, productivity reform. And you touched on the startup sector there. I mean how you get productivity is through innovation, is through new businesses starting, new technologies emerging and being embraced by existing and new businesses, industries being disrupted by new challenges. That's how processes improve in our market economic system. And there has been too little of that in Australia. So I'm keen to talk more about early stage innovation economy if you like, as a way to help get the productivity cycle moving again in Australia.

JAMES RILEY: Okay, let's talk about one area that's definitely in your new portfolio that would be on the changes to treatment of superannuation tax and there is the treatment of the taxation of unrealised gains and its impact or potential impact on investment in very early stage startups. Is that a real problem? How do you view that?

DAVE SHARMA: Yeah, I think it's a massive problem. So you can have arguments about, in sort of tax purist terms about whether you should be taxing unrealised gains or not and what the right balance should be in superannuation accounts before you apply another levy of tax. But the thing I'm most interested in and concerned about is what it will do to the availability of patient early stage risk oriented capital that is prepared to take a bet and invest in early stage businesses that have uncertain prospects, that might deliver a great return, might go to zero, but are unlikely to reach any sort of liquidity event for sort of five to 10 years. So if you're an investor and you, you give an early stage company a Series A or a seed round $100,000, say it might be that that company raises five times the valuation you invested in in a few years time. So then notionally you've had a 5x gain, right? And you'll need to pay tax on that if you've invested out of your self managed superannuation fund. But we all know anyone who's been in this industry know that just because they've had an up round doesn't mean that the business won't go to zero in a few years time. It doesn't mean that you'll be able to get the money out your gains anytime soon. And so what this will effectively do is drain the pool of available capital that goes into these businesses because suddenly people are going to have to pay a, incur a tax liability and pay a tax bill on a gain that's theoretical only and that might never materialise or might not release any capital to allow you to pay that bill. So I think this is a terrible thing for our sector and it's particularly true given that general attitude and the availability of capital towards this sector is one of our biggest constraints in Australia.

JAMES RILEY: Okay, let me ask you this. Being a shadow assistant in treasury, it sort of gives you quite a licence to roam, doesn't it? Because treasury has an impact on so many policy areas. For example, at the press club the other day, Nobel laureate Brian Schmidt and economist Richard Holden were talking about the needed structural reform to research to enable our sovereign research capability. But there would be any number of other examples where treasury is hugely important to the policy discussion. Where will you focus yourself?

DAVE SHARMA: Well, look, I think it is a broad, I intend to take an extensive interpretation to it. I mean, I think the portfolio, covering as it does, you know, competition, treasury and charities as well, it covers all those sort of manner of economic activity in Australia. But where I see the challenge in a nutshell is, you know, how do we get productivity growing again in Australia? How do we have people producing more with less? Because ultimately the driver of higher living standards and a larger economy which can fund generous social services is productivity growth. And the Productivity Commission said just last week that 80% of our growth in national income over the last 30 years has come from productivity growth. The rest is kind of a terms of trade windfalls from commodity price firms and whatnot. So if you don't have productivity moving, the economy's not getting any larger, people's living standards aren't improving and the availability of public money for essential social services is constrained, whether that's, you know, aged care, whether it's disability care, whether it's the need to increase our defence force. So I intend to use the portfolio to kind of examine everything that is at the heart of our productivity challenge and understand why business Confidence is so low. Why businesses are largely not investing in Australia. Those are all massive concerns and they're storing up problems for ourselves as a nation, but also for our people.

JAMES RILEY: Okay, I want to talk to you about the big wave of change that's on its way with artificial intelligence across all industry sectors. But before I do, let me ask you. We sort of became engaged in setting up this conversation. We were talking about some misinformation, disinformation themes. I think you were in the US earlier in the year. President Trump was about to be inaugurated.

DAVE SHARMA: I think that's right, yeah.

JAMES RILEY: So let me ask you this. I mean, there's been a dramatic increase in big tech influence in the us. The power of these platforms is well recognised, well talked about. I want to ask you what you saw in the us and then how do we, as a sovereign nation that we are, how does a country like Australia try and govern platforms like this that are so large, powerful and controlled elsewhere?

DAVE SHARMA: Look, it's one of the big policy challenges of the age. I was in the US earlier in the year. I spent some time in Seattle with Amazon and Microsoft and spent some time in San Francisco with Google and at Stanford University where, you know, largely artificial intelligence was all anyone wanted to talk about, with good reason, given its potential impact on, you know, every sphere of human activity and it's its potential enabling effect. I think Australia needs to recognise obviously that we are part of a global economy and yes, we can exercise national sovereignty and yes, we should take our own policy approaches, but we also need to recognise that we are competing with other jurisdictions, the United States, Europe, Japan, Southeast Asia, to attract new industries, to generate inwards investment to produce goods more efficiently. And we cannot afford to ignore that competitive dynamic. So we need to watch what's happening around the world elsewhere. We need to coordinate where we can through bodies like the G20 and through bodies like the OECD, which have similar economic profiles and structures and similar. But we can't pretend that we're an island nation in the sort of technological sense, even if we might be geographically. We can't cut ourselves off from these changes. And one of my concerns about where the debate around artificial intelligence in Australia seems to be heading under this government is that if we take too risk averse an approach, or if we think we're going to cut ourselves off from this and let the rest of the world experiment with it, and then we'll see how it all ends up, then we will be left behind and that will be to the detriment of not Just certain sectors and industries and workplaces, but to the detriment of us nationally.

JAMES RILEY: Yeah. I mean, in the last term of government, I think there was quite a focus on risk as opposed to reward, I suppose. Let me ask you, there is a wave of artificial intelligence coming, as you say, across all sectors. Yesterday, our new Industry and Innovation Minister, Tim Ayers, your colleague, he wants unions to be more involved or more say in how AI is implemented in the workplace. You had some criticisms on that.

DAVE SHARMA: I did. I think that's entirely the wrong approach to be taking. I mean, I think, yes, of course workers will be intimately involved in the use and deployment of AI in the workplace. I mean, if AI is to be a success, workers will need to be part of that journey. But the idea that trade unions, which, you know, trade unions are there to represent a particular sector of the population and a particular part of the business enterprise, and I had no quibble with that role, but the idea that they should be allowed to effectively exercise a veto or constrain the use of AI in a workplace, I think is an incredibly retrograde step and will put Australia the back of the park. I mean, I think we don't know yet how artificial intelligence will transform certain sectors and industries. And in some areas it will have quite a big impact, in others it will be small. But, you know, what we will need to be able to do in Australia is experiment and iterate and test and refine and moderate. And we will find that like many new technologies, just because they exist, it doesn't sort of transform the way the business is done. What needs to happen is workers need to learn how to use them. Business systems and processes need to be re engineered around the new technology. And then some new methodologies and new ways of doing business will need to emerge. And all that will take time and we'll need to take a relatively liberal, in the small, l sense liberal approach to the use of this technology. So the idea that we need to sort of completely game something out before we allow this experimentation and innovation to happen and that we need to account for and identify any number of potential risks, I think it's just a recipe for stasis and inaction. And I think that's what concerns me. I mean, we know that the trade unions are a big presence in this Labour government. They were able to engineer quite massive changes to the industrial relations system in a way that benefited trade unions in the first term of this Labour government. I'm concerned they're going to try and do the same thing with artificial intelligence and Just basically make it a no go zone for Australian businesses.

JAMES RILEY: So maybe you could just elaborate a little bit. I'm interested in the conversations that you had when you're in Seattle and when you're in San Francisco. Two of the epicentres of development in this industry. Describe a conversation that you have there and a conversation that you have in Australia. Are we talking about the same things?

DAVE SHARMA: I don't think we in Australia understand just quite how quickly this technology is moving. So one of the figures that stuck with me, from a professor at Stanford, he talked about the time taken for technology to reach one third penetration of the population, right, for one third of the population to be embracing and using this new technology. So in the United States, that's 100 million people, the population's 300 million. So electricity, for instance, it took 45 years from when electricity was invented for one third of the population to be using it. A telephone was 35 years. TVs for 25 years. Cell phones 13 years. Internet, which we think of as ubiquitous today, took seven years for one third of the population to be using that. ChatGPT took 60 days, two months for one third of the population to be using it. So that's happening orders of magnitude more quickly in terms of the uptake and embrace of new technology than we've seen before. That doesn't mean everyone's using ChatGPT every day or they've integrated into their lives or anything else like that. But it shows that the cycle of this is moving very quickly. And any of us who have children who are at school know that children are using this all the time. I mean, I use it to help my kids with their homework when they come to me with a maths problem and I don't remember how to do the integration of this or, you know, solve a quadratic equation anymore. I'll use ChatGPT or a similar thing to give me the answer. So this is moving a lot more quickly, I think, than people realise. And there's already a lot of anecdotal evidence that even in businesses that do not even have an AI policy, right, it's not integrated into their systems. Workers are using AI all the time to help them with their job because they recognise it's a productivity enhancer, it's a tool that allows them to do the job more quickly. So, you know, we need to get to grips with that and realise that in many respects, you know, the horse is already bolted. We shouldn't be trying to shut the barn doors now.

JAMES RILEY: So I'll start drawing it to a close now, but on that I know it's slightly fatuous to say, like everyone says government should do more. Of course there's always things that we can do more of. But in relation to AI, there's a global war for talent. There's huge competition for Nvidia chips, there's competition among nations to attract data centres. All this kind of AI infrastructure. You're looking at this landscape, you're back from the us having talked to these people. How can Australia most efficiently and quickly enable our capability?

DAVE SHARMA: I would think that our traditional strengths as sort of a magnet for talent and attractiveness of investment has tended to be a regulatory setting that's favourable and strong. Rule of law and political stability, those tend to be our enduring assets. We're not going to spend, and there's no tradition of us spending billions or trillions of dollars to try and establish an industry from the beginning. We're not that sort of economy and we don't run that sort of economy. So what I think we need to focus on is our regul settings and attitudinal settings. And this is an area where traditionally it's been a strength of Australia's. But we risk getting it badly wrong here if we take an overly conservative or risk averse approach to this new technology. If we throw up a whole lot of barriers, if we say that before a business can use AI they need to consult with the trade union and it becomes part of the next round of enterprise agreements. Even if we set up a dynamic that workers and business are somehow on opposite sides of this AI equation, that it's a zero sum proposition. I mean, all the evidence of past technological change is that workers benefit as much as the business from the deployment of new technology because it allows them to do their job more efficiently. It often removes them from routine, repetitive tasks and allows them to focus on higher level, more conceptually challenging and more intellectually interesting work. So, you know, we need to be embracing that. And I think the best thing the government can do is not stymie this with red tape and regulation and bureaucracy. I think that's the main challenge we face.

JAMES RILEY: All right, Senator Dave Sharma, thanks very much for coming on the Commercial Disco. We look forward to talking to you again.

DAVE SHARMA: Look forward to keeping the conversation going. James, thanks for having me on.

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