(Nictation = an involuntary eye “tic” … perhaps suggestive of excessive irritation or (and?) personality disorder)
Let me tell you why.
I recently wrote a BRW post on Australia’s Wired Future, where I pontificated about why I think Australia’s National Broadband Network (NBN) is kind of exciting – and even a little bit important. For those of you reading this post outside of Australia and have no idea what I am talking about, simply take my word for it that any public infrastructure project you can think of in your country couldn’t possibly be as politically dysfunctional as our NBN.
I’m actually very bullish about NBN and what it could mean for the country. What I am not bullish about is public research institutions squandering tax payer dollars on marginal research in the ICT space as part of a “push” to create a knowledge economy for the future. In my post I (perhaps unfairly) singled out CSIRO (Commonwealth Scientific and Industrial Research Organisation) and NICTA (National ICT Australia), two public research institutions that have active programs in what could be generally described as “Broadband Economy.” They even collude in something called the Australian Centre for Broadband Innovation (ACBI).
(By the way, don’t go to www.acbi.net.au – you’ll just get a website for Viagra)
I should also say that I am a fairly big fan of CSIRO in many regards. CSIRO has done some amazing work over the years and made fundamental contributions to science and technology from gene therapy to mining technologies (important things like solvent extraction of metals from complex ore deposits) and even Wi-Fi … though its size and ‘corporate’ demeanour has, in my opinion, become a little unchecked in recent years. CSIRO is an example of an organization that could probably contribute a lot more to the economy than it does – but it fails to do so because it has poor governance, a lack of leadership that understands technology commercialization and an almost complete lack of an effective ability to transfer technology out of its hallowed walls into private enterprise.
Certainly, CSIRO’s integrity has come into question a number of times recently, such as the recent DataDot scandal. I’ll also add that building substantial in-house legal teams to sue people isn’t what public research institutions are supposed to be about.
NICTA is also an impressive organization in some ways. It reminds me a lot of the French INRIA (Institut national de recherche en informatique et en automatique), where I’ve made several fascinating visits over the years. They do lots of “neat” stuff – and by the way, I think their current CEO is a pretty awesome guy. The problem with this state-funded science model is that it generally results in technology enhancements that benefit the global body of knowledge but don’t dramatically enhance the domestic economy. NICTA claims a $3Bn annual benefit to the economy, but I don’t believe it.
Both NICTA and CSIRO do valiantly try to transfer their technology into the commercial domain and I will not be so unkind as to say that there have been no successes – there have been. But the overwhelming experience is that it is bloody difficult to get technology out of our public research institutions because they have forgotten that they are funded by tax payer money and they try to behave like corporations that expect to see some kind of off-scale ROI for their “investment.” That is completely not the point of publicly-funded research – the purpose is to get it out there and get people using it. Easily.
The best evidence of the lack of efficacy in transferring technology out into the commercial domain is the fact that NICTA and CSIRO pride themselves on owning equity in companies/spin-outs that have in-licensed their technology (their “portfolios”). This is utter crap. Government organisations have no business owning equity in private enterprise, except maybe bailed banks. In my view, if a licensing deal contains equity as a substantial proportion of the deal – it means that the deal is a lousy deal, usually for both parties. Sure – many licensing deals I have done with public institutions and universities over the years have included some sort of an equity “loyalty” snifter, but that was on top of a fair and reasonable royalty/milestone structure to both parties and should be viewed as upside only.
In fact, there are countless case studies that demonstrate royalty holders (i.e. non-dilutive participants in commercial success) do better out of a deal than equity holders…
… and clearly, nobody wants the corporate governance headache that comes from some public servant messing around with your cap table or possibly (heaven forbid) sitting on your board. CSIRO/NICTA are infamous for both, and spin-out company boards should not be places to park public servants for “prestige” non-exec seats. I should note that in the US, in many states (for example California), public institutions are actually banned or capped on equity ownership and/or participation in the governance of spin-outs.
So what does this have to do with NBN? Well, for Australia to get the most out of the advantage we have in early adoption of Fibre-to-the-Home (assuming our politicians don’t screw it up, which is looking quite likely at the moment), we are going to want to have a vibrant innovation ecosystem around NBN. At the moment, this “ecosystem” is taking the form of yet more money thrown at incumbent research organisations – like NICTA and CSIRO. If everyone could agree that they were doing a marvellous job (Wi-Fi lawsuits don’t count) then maybe that would be ok.
But this is not the case.
My argument is not so much premised on an anti-CSIRO/NICTA thesis (though I think it is fair to say that I am not bullish about most … not all, but most … of the ICT research being done there) but rather a belief that to create a real powerhouse of product and service development around the NBN investment, we might want to have a rethink how public R&D funds should be deployed. I think that putting $200m into the hands of highly innovative private sector initiatives on a competitive basis would do more for economic value creation than pumping it into overweight research incumbents.
It certainly couldn’t do any worse. Like ACBI’s ‘Social TV‘ trial. Woop-dee-doo…