Address to the Executive Telstra Team

Thanks David.

And congratulations on everything you have achieved as Chief Executive for the last six years – and in the 14 years you have been here at Telstra.

On Saturday morning my wife was reading all of the reviews about you in the newspapers. And after a while she turned around to me and said “no one said anything bad about him”. And I told her “that’s because he’s not a politician”.

But I think it is a mark of the man – you are universally respected. By everyone here, by both sides of politics, by shareholders and even competitors, and I know you will be missed.

I want to also congratulate Andy. You have big shoes to fill. I am looking forward to working with you and the whole team in the years ahead.

Telstra is such an important Australian company.

Unlike a lot of my friends, everyone here and tens of thousands of others, I have never worked at Telstra.

But from the outside looking in I see a company that has helped build a country. And a company that’s critical to Australia’s future.

And that’s what I want to talk about today – the future.

My electorate is about 25 kilometres from here. About 40 minutes drive on a good day. About three hours on a bad one.

It’s where I grew up. Where I had my first job – stacking the salad bar and waiting tables at Sizzler.

It’s one of the most multicultural places in Australia – people from all around the world. It’s also one of the poorest places in Australia. The unemployment rate is almost double the national average.

It’s also got more eBay millionaires than any other place in the country. In 2013 19 businesses in my electorate grossed more than $1 million using eBay – more than any other electorate in the country. Most are exporters.

Surprised? So was I.

It’s a great example of how technology is changing our economy.

Governments don’t create businesses like this. People do that. Smart people. Innovative people. But Government does play a role. And it is more than just getting out of the way.

I read a story in The Economist last year. It said in 20 years half the jobs that exist now will be gone. That includes lots of highly skilled jobs – like accountants.

That’s not that shocking – unless you’re an accountant.

Ever since the Industrial Revolution technology has been destroying old jobs and creating new ones.

200 years ago it was weavers replaced by mechanised looms. Tomorrow it will be accountants and a lot of other white collar jobs.

It’s what Joseph Schumpeter called “creative destruction”.

What’s important is what comes next?

And how do we prepare for it?

Some argue that we should expect a sharp rise in unemployment. There is some evidence to back that up. For the first time since the Industrial Revolution we are seeing
productivity growth without a growth in employment.

The article in The Economist gives the example of Instagram and Kodak:

“When Instagram… was sold to Facebook for about $1 billion in 2012, it had 30 million customers and employed 13 people. Kodak, which filed for bankruptcy a few months earlier, employed 145,000 people in its heyday”.

Others like McKinsey say for every job the internet destroys it will create 2.6 more.

That might be right. But the next question is where will these jobs be?

They could be here in Australia – or they could be on the other side of the world.

The countries that will be the most successful in the decades ahead will be the ones that are ready for this.

The ones with the capital and the skills, and the right laws and the right infrastructure.

When you hear politicians talk about the future they are usually talking about the rise of Asia or the ageing of our population.

Both are big and important. But so is this – the digitisation of our society.

If we don’t focus on this as much as the Asian Century, or the ageing of our population, we are making a big mistake.

We are a smart country. We have created everything from WiFi to the black box. From driverless trains to spray on skin.

Our digital economy is growing twice as fast as the rest of our economy.

Our mobile penetration is very good. Five years ago we were ranked 21 out of 34 OECD countries. Now we have got the second highest penetration in the world.

We also have a strong and growing App Economy. The US think tank the Progressive Policy Institute produced a report on this last year. They concluded there are about 140,000 people working in this economy – most here in NSW – and more per capita than the US or the UK.

But there are other areas where we are falling behind.

The last Akamai State of the Internet Report ranks us 44th in terms of average peak connection speeds, down four spots from the last report, and 47th in terms of broadband connectivity, down three spots.

I am not going to focus on the broadband wars here today, but I just make this point – if we don’t have the sort of infrastructure with the sort of speeds that our major competitors have, we will continue sit below them on this list, and more importantly we won’t be as competitive.

Our venture capital industry is also small and not well developed. In per capita terms it’s about a third the size of the United States’ venture capital industry, and almost a quarter the size of Canada’s.

We are also falling behind on crowd funding. The US introduced laws to facilitate this three years ago. New Zealand did it two years ago. We are still talking about it. And while we are talking about it, Australian companies like Equitise are setting up across the ditch – taking advantage of New Zealand’s laws. More will follow.

We are also off the pace in R&D. The amount we invest as a percentage of GDP is behind the OECD average. To make it worse the Government is cutting its funding to NICTA.

What I worry about most though is skills – or our lack of them.

Carl Sagan made the point 25 years ago that:

“we live in a society exquisitely dependent on science and technology, in which hardly anyone knows anything about science or technology.”

This is still true today. Perhaps more so.

Not enough Australians finish school, TAFE or university with the STEM skills they are going to need.

In 2002 about 47,000 students enrolled in university IT courses in Australia. Last year, that number was about 27,000.

To make matters worse, the majority of students who enrol in an IT degree, don’t complete it.

If you compare our record to other countries things look even worse.

The Global Innovation Index released a few months ago ranked Australia 73 out of 143 countries for the proportion of science and engineering graduates in the population.

Only 16 per cent of Australian university students graduate with STEM degrees. In South Korea it’s double that. In China it’s 41 percent. In Singapore it’s almost 50 per cent.

And they are the countries we are competing with.

Remember the point I made earlier about technology destroying some jobs and creating others.

Economist Tyler Cowen talks about a future with workers who are “good at working with intelligent machines and those who are replaced by them”.

I am worried about this because I can see it right now in my own electorate – eBay millionaires in a sea of unemployment.

This trend is only going to accelerate.

75 percent of the fastest growing jobs in Australia require STEM skills – and we are not creating enough people with those skills.

You must see that here at Telstra.

As a country we have three options – we can import skilled workers, we can send the work overseas, or we can change our education system to produce more people with the skills we need.

The third option is the only real long term option.

There is a symbiotic relationship between technological change and education.

In the wake of the Industrial Revolution it was changes to education – the introduction of universal or compulsory education – that helped to produce the workers needed for the different jobs being created, and spurred more innovation.

The digital revolution is exactly the same. Our education system needs to change to reflect changes happening now in our economy – and the changes that are going to take place in the decades ahead.

And that means everything from primary school to university.

In the UK last year they introduced a new curriculum that includes coding lessons for children as young as five.

The logic is pretty simple. If more jobs are going to require skills like coding and computational thinking we need to build this into the curriculum – and do it early.

Telstra gets this. I can see that from the work that Annie Parker from Muru-D is doing with Code Club Australia.

The Poms get it. They have embedded this in the curriculum. But once again, we are still talking about it.

Two years ago a new national curriculum came out with this in it. Last year Christopher Pyne commissioned a review. It said it wasn’t necessary to have a stand-alone subject teaching this until Year 9. Now the Government is conducting a review into this review.

Last week at the NICTA Techfest Malcolm Turnbull made the same point I am making. He said children as young as five should be introduced to computational thinking and that coding is just as important as reading, writing and arithmetic.

He’s right. The problem is he doesn’t have the numbers in the Government to make this happen – at least not yet.

We don’t just have to change what’s being taught. We also need more skilled teachers to teach them – and they don’t all have to be in the classroom.

It’s worth looking at the Massive Open Online Course (MOOC) model and whether it can be adapted for primary and high school students.

We also need to get universities to take a more proactive role in encouraging students to take up STEM courses (the Government’s plans to increase the cost of university degrees won’t help with that) and we need to get Australian universities and Australian businesses to collaborate more.

I was in Silicon Valley last year and I asked the sort of questions everyone one asks when they first go there – in particular why is Silicon Valley where it is?

I got a couple of answers. Some mentioned infrastructure. Some talked about IP laws. Some mentioned proximity to capital and the appetite for risk. Everyone said Stanford. Its research park, applied learning, its entrepreneurial spirit and its engagement with business.

That, everyone told me, was fundamental to spawning so much innovation and so many successful companies.

It’s also the engine that continues to feed Silicon Valley companies with the engineers they need.

The same could be said of Cambridge or Caltech.

So how do we compare?

Our rate of university and business collaboration is the lowest in the OECD.

We rank 81st in the world for converting raw innovation capability into the outputs business needs.

Fewer than 10 per cent of Australian companies involved in innovation work with a university or a research institution. We’ve got to do better.

Government has an important role to play in all the areas where we are falling behind – infrastructure, capital, R&D, skills and collaboration.

So has Telstra. I talked at the start about Telstra’s role in building Australia and your importance to our future. That’s not just building and operating infrastructure or related services.

You have a better understanding than most of the big challenges and opportunities we face – in Asia, the ageing of our population and the smart economy.

You’re working in those areas right now.

That’s why I think Telstra has to be a leader in this debate – to help make sure Government understands how important this is and work with Government, industry and universities and research institutions to develop a real plan that addresses the sort of issues I talked about today.

When I was in Silicon Valley I met an Australian named Tan Le. She came to Australia as a refugee from Vietnam at the age of four – and grew up in Footscray in Melbourne.

She still remembers flying into Melbourne in the early 1980s and seeing the big open spaces out the window of the plane.

When the plane landed her mother told her they were on very special ground and when she got off the plane she should bend down and touch it.

The little four year old did what her mother told her to do. She bent down and touched the ground and then looked up and said “Mum, it doesn’t feel very special”. Her mum looked back and said “You have to make it special with your mind”.

And she did. Tan Le was a refugee at four. She was a university student at 16. Young Australian of the Year at 21. A barrister by 22. She founded her first company when she was 26.

She is now based in San Francisco. She is the co-founder of a company called Emotiv – a neuro-engineering company. They make devices that read brain signals and interpret facial expressions. You wear the device on your head.

It has the potential to transform things like gaming. More importantly though, it enables quadriplegics to move their own wheelchair – using their brain. It will change the lives of people all around the world.

I asked her why she went to the US. She said because that’s where the capital, the skills and the experience are.

Tan’s story tells us a lot about us.

We are a very special country, where incredible things can happen. But we are also a small part of an increasingly competitive world. In a digital century.

And if we are going to be successful we have a lot to do. It’s time to get on with it.

Thanks very much.