Compared to the Philippines, the ability of setting up a small business in Australia is much better and easier. And yet, compared to the United States, it is lacking certain business factors that make it as good.
Microsoft founder Bill Gates is today one of the world’s biggest philanthropists having built up his business from an obscure traffic management software company to what was at one stage the world’s biggest technology business.
The first thing is he would have been encouraged to study law; just like his dad. In the 1970s, lawyers had far more status and career prospects than software developers in Australia.
Causing more concern for his parents and career counsellor would have been his determination to run his own business. It’s far safer to get a safe job, buy a house then start buying investment properties to fund your retirement.
If Bill still persisted with his ideas, he’d have hit a funding problem. No bank would’ve been interested in lending and his other alternatives would have been restricted.
In the Australia of the 1970s and 80s there would be few alternatives for a business like Microsoft. Even today, getting funding from angel groups and venture capital funds depends upon luck and connections rather than viable business ideas.
Bill Gates’ big break came when IBM knocked on his door to solve their problem of finding a personal computer operating system; the likelihood of any Australian company seeking help from a small operator, let alone one run by a couple of twenty-somethings, is so unlikely that even today it’s difficult to comprehend it happening.
Eventually an antipodean Bill Gates would have probably admitted defeat, wound up his business and gone to work for dad’s law firm.
Over time a smart, hard working young lawyer like Bill would have done well and today he’d be the partner of a big law firm with a dozen investment properties – although some of the coastal holiday properties wouldn’t be going well.
While some things have changed in the last thirty years – funding is a little easier to find in the current angel and venture capital mania – most Australians couldn’t think about following in Bill Gates’ path.
Part of the reason is conservatism but a much more important reason are our taxation and social security systems.
Under our government policies an inventor, innovator or entrepreneur is penalised for taking risks. The ATO starts with the assumption all small or new businesses are tax dodges while ASIC is a thinly disguised small business tax agency and assets tests punish anyone with the temerity to consider building a business rather than buying investment properties.
At the same time, a wage earner is allowed to offset losses made in property or shares against their income taxes, something that those building the businesses or inventing the tools of the future are expressly forbidden from doing.
Coupled with exemptions on taxing the capital gains on homes, Australian households – and society – are vastly over invested in property.
Making matters worse, the ramping up of property prices over the last thirty years has allowed generations of Australians to believe that property is risk-free and doubles in value every decade. Banks reluctant to lend to anyone who doesn’t have real estate equity to secure their loans reinforce that perception.
So we have a society that favours property speculation over invention and innovation.
Every year in the run up to Federal budget time tax reform becomes an issue, the real effects of negative gearing and other subsidies for housing speculation – the distortion of our economy and society’s investment attitudes – are never discussed.
In Australia there are thousands of smart young kids today who could be the Bill Gates of the 21st Century.
The question is do we want to encourage them to lead their generation or steer them towards a safe job and an investment property just like grandpa?
Paul Wallbank is one of Australia’s leading experts on how industries and societies are changing in this connected, globalised era. When he isn’t explaining technology issues, he helps businesses and community organisations find opportunities in the new economy.