But do we have those conversations almost as an excuse sometimes, for not diving in and taking the risks? We delay decision-making about whether or not we should invest in various products or various types of industries because we are looking for a perfect model.
AC: How do you change that sort of mindset and behaviour?
CS: Sometimes we need a crisis to generate change because no one likes change. Maybe it's our colonial past, but the change aspect is really hard. Cathie and I both previously came from the corporate environment at Macquarie Group and its modus operandi was constantly managing change.
But as a society, I don't think we do manage it well so unfortunately you may need a shock.
CA: If you think about it, there are a whole bunch of things happening right now that are not a crisis per se but situations where you can grasp opportunities. Massive technological developments, real opportunities for disruption. We have got wonderful universities, we have got the CSIRO - the leading innovator in connection with all this - we can exploit that.
We sit on the edge of the fastest growing part of the world where there is going to be the most opportunities, we have a really highly educated workforce, we have got good levels of immigration so we are creating an environment of much diversity…the time is right to exploit these opportunities.
The crisis element is if we don't do it, there is going to be this drift of jobs, and we have seen rival financial hubs setting up in Asia. So how weird is that - we have a wonderful superannuation system, a massive pool of funds, why on earth don't we think it's an emergency when jobs designed to make investments using that pool of money are drifting off into other jurisdictions?
KS: If you think about the world we live in today compared to the world 30 years ago, it's like comparing night and day. But we are an island, a very lovely, safe, secure island, and we are not looking outside of that lens. And the world's going to be a very different place quickly…it won't take as long as 30 years to change beyond recognition again.
AC: What do you see in those companies that do embrace risk taking or create innovation or have the sort of culture that facilitates it? Are there things there that are different?
KS: If you talk about a large corporation trying to innovate, for example, there is a need to put boundaries up and to innovate in a safe way. With risk taking, we are not talking about abandoning all sense of judgement. We are talking about taking managed, calculated, appropriate risk. It works well within a large corporation where there are defined boundaries, a separate focus; quite often it may even be cannibalising an existing business, so it has got to be separated from the whole.
There is also a willingness to give something a go and then, if it fails, acknowledge we lost that small amount of money and celebrate what we learnt out of that experience. The alternative is, and what can easily happen, is people not having a go in the first place because of the existing structures and metrics and what they are being asked to do every day doesn't facilitate thinking differently or doing something innovative.
AC: How do you set those boundaries? How do you define a good failure and a bad failure?
CA: It's really important for there to be a great deal of thought given to what is this organisation about, what's our value proposition, and what are the things that can make it unlikely that we will achieve the outcomes we are looking for, what are those sort of fundamental risks? And then assessing and understanding your appetite in relation to those particular risks. The corporate governance guidelines, setting up the established principles.
Then there's the question about what happens if someone has failed in the past and should they have a ticket to put their hand out for money from people in the future. From our perspective it's about the sorts of disclosures that you need to make, you need to say to people, the sort of enterprise, or the sort of product we are asking you to invest in has got these fundamental risks and to have people sitting there soberly thinking about whether they're risks that are appropriate to them.
I just wonder if we, and I am talking myself here as a financial consumer, whether we do soberly think about that enough and I do think perhaps there is work for us all to do in making sure that we are arming people with the skills to actually think a little bit more about the risks.
There is a lot of work to be done on the literacy that goes with risk taking.
AC: How do you distinguish when failure is being used as a good positive learning experience and someone to follow?
CS: I don't think there is any hard and fast rule, that's the first thing. It's a mindset, it really has to be a mindset to say “well, ok, this person hasn't done as well as they initially thought, and the idea fell over, but can you build on that?"
KS: The learning culture is critical.
CA: And it probably depends on the nature of the investment, I imagine some sectors, for example in biotech where you have science driving things, there are things that may not be within your control quite as much as in other sectors.
CS: If you don't have the vision already defined then it's very hard to set boundaries. Without that you're potentially just going to be running on the spot and wasting a whole lot of energy with no outcomes.