Equity can be the mother of invention - Op Ed, Sydney Morning Herald


Sydney Morning Herald, 13 November 2019

Returning from maternity leave to the traditional world of law, Carly Stebbing quickly discovered that the profession was not set up to embrace people who wanted to work three days a week. So she co-founded Resolution123, an online employment law advice site. Not only was entrepreneurship more flexible than an office law job – it also led to a startup that matches expert support for people facing unfair dismissal, workplace bullying or underpayment.

In theory, anyone can found a startup. In practice, startup founders aren't typically like Stebbing. They are most likely to be young men from affluent backgrounds. This isn’t just inequitable – it’s also inefficient. Society ends up missing out on the productive talents of potential Marie Curies and Albert Einsteins, just because they grow up in disadvantaged circumstances.

According to one study of innovation, Americans who were born into the top 1 per cent were 10 times as likely to become inventors as those born into the bottom half of the income distribution. Bright young entrepreneurs in affluent households can typically borrow money from their parents. They can draw on broad social networks to connect to suppliers, business partners, and customers. By contrast, equally bright entrepreneurs in poor families might have great ideas, but lack the networks and resources to realise them.

In Australia, the Startup Muster survey of technology startups found a similar skew. Women comprise just 22 per cent of founders. Children of entrepreneurial parents are over-represented among innovators. It helps to have money. Asked how they funded their startup, two-thirds of founders said that they made a personal cash contribution.

In 1975, economist Arthur Okun published Equality and Efficiency: The Big Tradeoff, in which he argued that policymakers often have to choose between fairness and growth. Sometimes such a tradeoff does exist, but it’s a mistake to think that we always have to make this painful choice. The problem with many contemporary debates over innovation and equality is that the extreme positions – innovation benefits everyone versus equality hurts everyone – have come to dominate the discussion. Once we move away from the fringes, we find a plethora of good policies that allow both more innovation and less inequality. Okun’s trade-off is often a false choice.

A range of organisations are thinking hard about how to encourage people from low-income backgrounds to follow an entrepreneurial path. UTS Startups is a program that aims to give half of all undergraduates an experience with startups during their studies. Rather than entrepreneurship being special, director Murray Hurps says his goal is for "all students to see entrepreneurship as normal, desirable, accessible and just part of their experience at UTS". This means overcoming the barriers that have traditionally deterred women, Indigenous Australians and first-in-family students from becoming inventors.

Other institutions are following similar paths. The University of NSW’s Founders program has given thousands of students a taste of innovation through their foundational courses. The University of Western Sydney is establishing its technology "Launch Pad" for startup firms in Penrith, Liverpool and Parramatta. At the University of Wollongong, the iAccelerate incubator has a focus on technologies such as 3D printing, taking advantage of the fact that the region has a surplus of talented manufacturing workers.

Making it easier for children from poor backgrounds to become entrepreneurs is critical, but the challenge doesn’t stop there. To boost innovation, successful research programs need to foster more moonshots, and less dull incrementalism. It’s worth thinking about whether we can encourage healthy competition between research funders. Sometimes, it may be more effective to fund prizes, which are especially attractive to unconventional innovators.

On the equity side, the goal ought to be a set of institutions that provide a safety net – both for entrepreneurs who fall short of the stars and those left behind when the rocket takes off. It pays to think about such institutions as a form of insurance, providing greater resilience in the face of a changing world. If you’re giving advice to a teenager, now is the time to tell them about the value of being flexible. Education isn’t just an investment; it’s about providing more life options.

To achieve this in the education system means making teacher effectiveness the core focus of schooling priority, improving the quality of vocational training, and encouraging the development of high-quality online education. It makes sense to use the talents of the 51 per cent of the population who are women by encouraging technologies that make jobs more family friendly, and stamping out sexual harassment. Gender equity isn’t just worthwhile because it will boost productivity but also because – as Canadian Prime Minister Justin Trudeau might say – it’s 2019.

It’s no use hoping for a crystal ball. As Chicago University economist Sendhil Mullainathan puts it: "The safest prediction is that reality will outstrip our expectations. So, let us craft our policies not just for what we expect but for what will surely surprise us." The task is to shape a future that looks more like Star Trek than Terminator.

Joshua Gans is a professor at the University of Toronto. Andrew Leigh is a federal member of Parliament. Their new book is Innovation + Equality: How to Create a Future That Is More Star Trek Than Terminator (MIT Press). Ross Gittins is on leave.
Authorised by Paul Erickson, ALP, Canberra.

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Cnr Gungahlin Pl and Efkarpidis Street, Gungahlin ACT 2912 | 02 6247 4396 | [email protected] | Authorised by A. Leigh MP, Australian Labor Party (ACT Branch), Canberra.