Exchange - Spring Edition 2015 by The Faculty of Business and Economics, The University of Melbourne

SPRING EDITION 2015

14 A dvancing our understanding of financial decision making

21 E nding the cycle of homelessness

24 Start your own business

40 A siaâ&#x20AC;&#x2122;s Economic Powerhouse

OUR CONTRIBUTORS Dr Ben Neville is Senior Lecturer in Marketing at the Faculty of Business and Economics (FBE). His research and teaching interests include corporate social responsibility and business ethics, climate change and environmental issues.

Prof Peter Gahan is founder and Director of the Centre for Workplace Leadership (CWL) and Professor of Management at FBE. His expertise includes high performance work practices, managing conflict and negotiations, and management and leadership. @PeterGGahan

Dr David Byrne is an economics lecturer and researcher at FBE working on industrial and energy economics, with a focus on the petrol, electricity and cable television industries.

Sarah Fortuna is Operations Manager at CWL where she is focused on laying strong foundations of strategy and process. She has extensive experience in higher education and government advisory. @sarahfortuna

Dr Leslie Martin lectures in economics at FBE. Her research investigates environmental economics, energy economics, industrial organisation and international development.

Jacob Workman is Manager of Education and Programs at CWL. He studied entrepreneurial management, and management and strategic decision-making and has held managerial positions in higher education and industry. @workmanatwork

A/Prof Roger Wilkins is Principal Research Fellow and Deputy Director (Research) at Melbourne Institute, and author of the HILDA report. He is an expert commentator on labour market outcomes, economic wellbeing, and welfare dependence. @RogerWilkins_au

Dr Jesse E. Olsen is a research fellow at CWL. He holds a PhD in organisational behaviour and his research interests include diversity management, cross-cultural management and virtual work. @JesseEOlsen

Prof John Freebairn is Professor of Economics at FBE. His research interests include applied microeconomics and policy analysis, specialising in taxation and natural resources.

Prof Jeff Borland is Professor of Economics at FBE with expertise in Australian labour markets, policy evaluation and design, Australian economic history, and microeconomics. Jeff produces a monthly labour market snapshot, available upon request.

Dr Carsten Murawski is a Senior Finance Lecturer and Cohead of the Decision Neuroscience Laboratory (DLab). His research focuses on reward-based decision-making to inform our understanding of major financial, economic and health problems. @carstenmurawski

Prof Carolyn Whitzman is Professor of Urban Planning at the Faculty of Architecture, Building and Planning (ABP). Current research interests emphasise building partnerships, policies and practices to improve urban liveability and equity. @CWhitzman

Dr Stefan Bode is Lecturer in Cognitive Psychology and Behavioural Neuroscience at the Melbourne School of Psychological Sciences, and Co-head of the DLab. His research investigates how decisions, intentions and rules are encoded in the brain, and how contextual information can bias preferences outside the decision makers’ awareness.

A/Prof Masa Noguchi teaches Environmental Design at ABP. He is founder and coordinator of ZEMCH (Zero Energy Mass Customised Housing), which consists of 300 international partners and industry-academia knowledge transfer events.

Prof Peter Bossaerts is Professor of Experimental Finance and Decision Neuroscience at FBE. He is one of the founders of the discipline of neuroeconomics and pioneered the study of financial markets using controlled experiments. His research has focused on financial risks and risk-taking, from individual to the market level.

A/Prof Prakash Singh lectures in management and marketing at FBE. His research interests include supply chain management, quality management, sustainable operations and supply chains, social investment, and innovation management.

Dr Yi-Ping Tseng is a Senior Research Fellow at the Melbourne Institute, and one of the lead researchers on Journeys Home. Her research focuses primarily on labour economics and applied microeconomics.

Professor Garry Twite is a Visiting Professor in the Department of Finance, FBE and is concerned with corporate finance, corporate governance, compensation and real estate.

Prof Carole Comerton-Forde is Professor of Finance at FBE and her research looks at market structure, with a focus on market liquidity and market integrity, specialising in the impact of high frequency trading and dark pools on market quality.

Jason Kuan is an alumnus of ABP, and Senior Property Advocate and Financial Advisor at Provincial Property Advocacy and Home Loans. He was formerly Property Valuations tutor at ABP, and Research Analyst for CBRE and Colliers International. @jasonkuan_ on Instagram

Catherine Reid is a Lecturer in Language and Literacy Education at the Melbourne Graduate School of Education (MGSE). She has co-developed and teaches Street Law in the Melbourne Law School, and has co-authored several secondary school textbooks.

Prof Howard Dick is Honorary Professorial Fellow in the Department of Management at FBE. A micro-economist and economic historian, he has published extensively on Indonesia. His current research focuses on corruption and governance.

Tom Griffith is Co-Founder of Emma & Tom’s, an Australian owned market-leading health drink and snacks company. He graduated from the University of Melbourne with a Bachelor of Commerce with the class of 1986. @EmmaAndToms

Prof Ross Garnaut AO is Professorial Research Fellow in Economics at the University of Melbourne. His career has been built around the analysis and practice of policy connected to development, economic policy and international relations in Australia, Asia and the Pacific.

Naomi Simson (BCom 1984), is Founding Director of redballoon.com.au, specialising in experience gifts, and also features as a Shark on Network TEN’s business reality program, Shark Tank Australia. @NaomiSimson

Dr Brent Coker lectures in internet marketing and social media at FBE. His research focuses on viral marketing and consumer behaviour on the internet. He is author of the upcoming book “Going Viral” (Pearson UK). @webreep

Media enquiries to Niamh Cremins niamh.cremins@unimelb.edu.au

SPR ING EDITION 2015

Responsible business

Smart customers save

Your wealth potential

In focus: investment banking

Tax and small business

Advancing our understanding of financial decision making (cover story)

Street finance

Ending the cycle of homelessness

Become an entrepreneur

Finance your start-up

Future of work

21st Century leaders

Diversity management

GFC recovery

Property market

Asia’s economic powerhouse

Sari Roti’s road to success

Indonesia’s resources boom

Going viral

Networking globally

Foundation dinner

FROM OUR DEANS Welcome to the first edition of the new magazine from the Faculty of Business and Economics – EXCHANGE. We are moving into an exciting phase of growth and development focused on enhancing our applied research outcomes, expanding our curriculum, and bolstering our connections with industry. EXCHANGE presents important advances in research, teaching and practice at the Faculty, as well as expert commentary on pressing societal and economic issues, and profiles the alumni that are shaping the world of business and economics.

Professor Paul Kofman Dean, Faculty of Business and Economics Sidney Myer Chair of Commerce

In this issue we investigate corporate social responsibility in practice and our experts analyse the government’s tax concession scheme for small business and the impact of Indonesia’s resources boom. David Byrne and Leslie Martin explore how customers are saving money and the environment using smart meter data, and we investigate advances in teaching to improve financial literacy. Our cover story profiles ground-breaking research at the forefront of decision neuroscience; crossing disciplinary boundaries to shed new light of how we make financial decisions. The Melbourne Institute has been powering economic and social insight for Australia for over fifty years. Here we profile new findings from the Institute on income, wellbeing and happiness in Australia, and explore how research can help end the cycle of homelessness. The Centre of Workplace Leadership was established to advance management practices and workplaces. Peter Gahan explores what it will take to lead the future of work, and we consider the role of leadership and diversity management in creating positive workplaces. Howard Dick analyses the tradition of Asian Family Business and we speak to Wendy Yap about her experience at the helm of Sari Roti, which she has grown to capture 90% of the bread market in Asia, excluding Japan.

Professor Zeger Degraeve Dean, Faculty of Business and Economics Dean, Melbourne Business School

As we prepare to launch our new Master of Entrepreneurship, we ask some successful alumni entrepreneurs for their top tips to make it in the world of start-up business. These are just some of our outstanding researchers, alumni and students. For all the latest research, news and events from the Faculty of Business and Economics visit our website: fbe.unimelb.edu.au.

WITH GREAT TRAVEL COMES GREAT RESPONSIBILITY Niamh Cremins

From flap-back sunhats to world-changing sombreros came an innovative travel business looking to save the planet one trip at a time.

On 25 April 2015, a 7.8 magnitude earthquake struck Nepal’s Gorka region triggering an avalanche on Mt Everest and devastating local communities. Within twenty-four hours, Intrepid Travel established emergency relief and at the time of printing had raised almost AUD$400,000 for the Nepal Earthquake Appeal. The Australian travel company has pledged to donate all profits from 2015/16 Nepal trips towards international and local NGOs working to rebuild the country. Almost 30 years ago, Darrell Wade and Geoff ‘Manch’ Manchester (both BCom 1981) founded Intrepid Travel with a vision to provide value-for-money travel adventures that benefited both travellers and the places they visit. Commitment to their socially conscious business model has been a key driver of success and seen the company expand to become a global leader in responsible travel, connecting over 250,000 travellers with inspiring experiences in more than 100 countries across all seven continents.

Turning altruistic vision into a business reality Only seven years after graduating with commerce degrees, Wade and Manch launched Intrepid Travel. But, despite a compelling business plan, they broke the number one rule of starting a new business. They didn’t have enough money to make it happen. While cash was in short supply, they had resourcefulness in abundance and very quickly identified a low risk opportunity to expand internationally. “We realised that the Australian market was very small for what we had in mind,” explains Wade. “So, we got on planes and found agents in New Zealand, Canada and the UK in the first year. The great thing about agents was that you didn’t have to pay them to promote your products, only when they made sales.” While growing their reach and establishing offices in source markets and destinations across the world, as well as expanding their offering of innovative unique travel itineraries, Wade and Manch were simultaneously advancing their responsible travel ethos.

The business partners, who met during their first week at the University of Melbourne, remain hands-on in ensuring sustained synergy between business success and social and environmental improvement activities. When I interviewed Wade just days after “One day about 10 years ago, while I was reading Tim Flannery’s the Gorkha earthquake, he was in Nepal reviewing reconstruction The Weather Makers, I realised that far from being a responsible efforts and evaluating after-effects in the areas Intrepid operate, travel company, we were in fact environmentalvandals; our to ensure safety for travellers and offer support to local teams carbon emissions were huge.” and suppliers. The earthquake had triggered an avalanche on Mt Everest. Kathmandu also suffered damage, and fears of From that day, Intrepid measured, managed and mitigated aftershocks, as well as the loss of homes, forced villagers into emissions from every day of every trip and the company was temporary huts. declared carbon neutral in 2010. The surrounding hilltop When I interviewed Wade just days after the Gorkha Intrepid’s philanthropic actions villages were worst hit— earthquake, he was in Nepal reviewing reconstruction also support their core business many reduced to rubble— efforts and evaluating after-effects in the areas by preserving the untapped but the mountains themselves culture and beauty of their global Intrepid operate, to ensure safety for travellers and are relatively intact. destinations, which offer travellers offer support to local teams and suppliers. “Tourism is the biggest uniquely authentic experiences. employer in the country and “For us, destination preservation has a far greater footprint than just those directly employed by and cultural protection is, and always has been, very important the industry,” says Wade. “Further aid dollars will help—and we will because continue our appeal. But I believe the best thing we can do now is this is what our travellers come to see and enjoy in the first actually visit Nepal so our work in the region is focused on making place,” says Wade. “You can’t have one without the other.” this possible.” Active participation in rebuilding Nepal is just part of the Dr Ben Neville, Department of Management and Marketing, says Intrepid’s commitment to their customers and to conserving Intrepid’s approach to corporate social responsibility (CSR) can be the global environment that is their playground. In 2002, they defined as broad. In contrast to a narrow method, based solely on established The Intrepid Foundation, a not-for-profit organisation yielding profit, Intrepid recognises the broader environments upon that allows travellers to give back to the communities they visit. which the business is dependent. “A broad CSR approach doesn’t The foundation has raised over AUD$4 million for more than 70 necessarily result in direct measurable returns,” explains Dr Neville, non-government organisations around the world, which support “but generally we see important in-kind business impact, such as initiatives in health care, education, human rights, child welfare, improved social bonds, brand perception and cost savings through sustainable development, environmental conservation and improved environmental efficiencies.” wildlife protection. Intrepid invests in internationally accredited projects in their biggest destinations to offset their carbon footprint and offers customers the opportunity to help tackle climate change by offsetting the most carbon-intensive portion of their trip, the flight. They also contribute to local economies by hiring local staff, using locally owned ground transportation and accommodation, recommending local vendors, and investing in renewable energy projects.

Dr Neville says it is becoming increasingly important for businesses to drive change. “It is more important than ever for businesses to take global leadership on social and environmental problems.”

Making philanthropic donations to the destinations where they operate was a core part of Intrepid’s original business plan. “The irony of our plan to me is that our philanthropy actually started before we had ever received an income ourselves,” says Wade. “I’m not entirely sure we didn’t take the business model a bit far!”

“Take the B Team, a conglomerate of business leaders providing a united voice to drive a better way of doing business for the wellbeing of people and planet; they recognise that their longterm business interests are dependent on a healthy social and natural environment, as well as a healthy global economy.”

Dr Neville continues, “Business in Australia has generally been very slow to recognise this, or at least to speak up and lead on these issues. Intrepid is a trailblazer in this sense and clearly understands the importance of preserving the social and environmental fabric, both for the local communities and for their own business. “Customers and other stakeholders are not experts in the social and environmental issues that face a company so businesses must show leadership in developing programs that prevent harm and address problems. The legitimacy of Intrepid’s CSR program fuels brand loyalty, where customers will the company to succeed, and this is played out through repeat business and strong word of mouth.”

Paying it forward Sharing core values and a strong vision for responsible travel, there is one thing the two entrepreneurs disagree on. While Manch felt that learning the basics in accounting, law, marketing and economics were invaluable in starting a new business, Wade was more impatient and wanted more entrepreneurial training and hands on activities. He has committed time and significant financial support to help enhance the offering of programs at the University of Melbourne that empower students to innovate, build and lead. “Programmes like the Melbourne Accelerator Program (MAP) equip students with the skills they need to position themselves competitively,” says Wade. “The business landscape is changing and the expectations are increasingly high. My daughter just enrolled in first year Bachelor of Commerce and I’ll be encouraging her to get involved in these initiatives and make the most of her time at Uni.” Darrell Wade is a member of the MAP advisory board and a mentor for budding entrepreneurs trying to get their businesses up and running. For more visit intrepidtravel.com or learn more about the Nepal appeal at: intrepidtravel.com/return-nepal Follow: @Intrepid_Travel

SMART CUSTOMERS SAVE

Dr David Byrne and Dr Leslie Martin

Recent advances in information technology are expected to transform electricity markets worldwide, and research from the Department of Economics at the University of Melbourne suggests customers who are informed about their energy use can save up to $50 on their electricity bill. This translates to a reduction of 212.40kg of carbon dioxide (CO2) in the air per household each year.

A mandatory state-wide rollout of â&#x20AC;&#x2DC;smart meterâ&#x20AC;&#x2122; technology in Victoria is set to transform supply and demand in the electricity market. Smart meters record real-time electricity use every 30 minutes. With online tools for customers to track their energy activity immediately, the potential for better management of energy resources is huge. However, outside small-scale pilots, there is little evidence of the actual impact of smart meters, and policy makers worry whether consumers will ultimately benefit from their widespread adoption, especially in a market like Victoria with active retail competition. With funding through the Australian Research Council (ARC) Linkage Projects, the University has partnered with electricity retailers and Billcap, an online consumer smart meter tool, to evaluate how consumers engage with the smart meter data and how that affects their bills and carbon footprint.

Changing consumer behaviour Early research suggests that the more customers know about their energy usage, the more likely they are to make changes that benefit their pockets and the environment. Using a sample of 8,000 Victorian households, the researchers used randomised controlled trials to analyse the behavioural changes brought about by access to the smart meter data. Some households were randomly given real-time feedback and peer comparisons on electricity use from their smart meter, while others were not. The economic and environmental impact of simply providing the information was striking: informed customers managed to reduce their electricity consumption by 4-5% relative to uninformed customers. For an average customer, this represents a $50 saving and 180 kWh reduction in electricity use per year.

These effects are largely driven by a particular household type. People who thought they were low electricity users before the experiment realised that they were not as green as they thought. So, while we find environmentallyconscious consumer types are those who are better able to take advantage of their smart meter data to realise cost and environmental savings, they do so because they were mistaken about their relative environmental impact. Providing them with feedback based on their smart meter data encourages them to become who they thought they were. These experiments are the first and largest of their kind ever run and will continue to inform industry best practice. Yann Burden, CEO of Billcap, says the research provides a solid evidence-based foundation for the companyâ&#x20AC;&#x2122;s innovation. â&#x20AC;&#x153;Our clients know that our commitment to improving their customer engagement is backed up by independently verified world-leading research.â&#x20AC;? Ongoing experimentation in partnership with Billcap will tackle pressing questions, such as: How can smart meter data be used to simplify customer choice? Can we make electricity like petrol in terms of price salience? How will customers respond as electricity prices become increasingly dynamic in the retail market? Who will win and lose from dynamic pricing, and how should policy be designed to protect socio-economically vulnerable households going forward? The ARC Linkage Projects scheme provides funding to eligible organisations to support research and development projects which are collaborative between higher education researchers and other parts of the national innovation system.

WHY AREN’T YOU EARNING ENOUGH?

Niamh Cremins

Australia’s largest household survey has revealed that the circumstances in which we grow up significantly impact our future income and wealth potential. Our parents’ educational attainment and occupation, family makeup, and the age at which we move out of the family home—as well as immigrant status and age of migration—are key indicators of future income and wealth potential. The Household, Income and Labour Dynamics in Australia (HILDA) Survey—produced by the Melbourne Institute—is Australia’s only large-scale nationally representative longitudinal survey, monitoring the movements of over 10,000 Australians since 2001 to create a ‘moving picture’ of how their lives are changing. The most recent report presents evidence of significant intergenerational transmission of socio-economic advantage and disadvantage, with educational attainment, employment and earnings at 25 years of age mirroring family income distribution. The analysis examined associations between family background characteristics and household income and wealth by analysing the economic wellbeing of people aged 35-54 and what they say about their family background. The survey also considered how family income when growing up affects economic outcomes in early adulthood, following individuals over eight years from the age of 17. The report author, Associate Professor Roger Wilkins, says the potential for such rich analysis will increase the longer the HILDA Survey continues. “As the length of the HILDA Survey panel grows, it will be increasingly possible to examine how outcomes and experiences, measured when individuals are young, affect their outcomes in later life.”

The research found that 25-year-olds with families in the top income quintile earn, on average, over $400 more per week than those with families in the bottom quintile. Individuals from higher income backgrounds are more likely to have a university degree and be employed in full time work. A mother’s employment when a daughter is 14 is linked to positive future education, employment and wealth outcomes, but was found to have no significant bearing on a son’s future economic status. A father’s employment, however, is associated with positive effects on income for both men and women, and positive effects on wealth for men, but not women. Parental occupation type is also a determining factor. Professional and managerial occupations of fathers, and professional and community, personal services, clerical, administrative and sales worker occupations of mothers, tend to be associated with positive wealth outcomes. Eldest male siblings generally have the best income and wealth outcomes but there are no statistical benefits for females who are the eldest child. Wealth potential appears to decline as the number of siblings increases, and only children tend to outearn those with one or more siblings.

Outcomes at age 25 by household income at age 17 Obtained a degree (%)

Bottom quintile

Weekly earnings ($, December 2012 prices)

Employed full-time (%)

Employed (%)

100

1100

500

2nd quintile Midde quintile 4th quintile Top quintile

Education cost vs. satisfaction in Australian primary schools

Private Catholic Government

“Generally the more children parents have, the fewer resources—time and money—they have for each child,” says Professor Wilkins.

Child will probably/definitely go to university (%)

The age a person leaves the family home is also related to labour market and outcomes. The survey found that people who moved out of home between the ages of 21 and 24 tended to achieve greater levels of wealth in later life than those who moved out before they turned 18. Remaining in the family home after 25 was found to be negatively associated with future earning potential. The survey found significant earning penalties for immigrants. Men born in continental Europe have a mean equivalised income that is $8,353 less than Australian born citizens. For women the earning penalty is smaller, but still statistically significant at $4,989. Regarding wealth measures, however, the penalties are greater. Men from continental Europe have $382,512 less in household wealth than native-born men, followed closely by continental European women. For men, each additional year before arrival in Australia acts to reduce household wealth by $4,803.

A+

Mean satisfaction with education

Find out more about what makes Australian’s happy, relationship satisfaction, education and labour market statistics in the latest HILDA report, available for free download at:

School achievement excellent or above average (%)

DETENTION

melbourneinstitute.com/hilda/ The HILDA Survey is conducted by the Melbourne Institute of Applied Economic and Social Research at the University of Melbourne, and funded by the Australian Government Department of Social Services.

Contacted by school because of poor behaviour (%)

Bullied at school (%)

Male and female employment statistics 40% not in labour force 57% employed 26.3% not in labour force

4.0% unemployed

3% unemployed 69.7% employed

IN FOCUS: INVESTMENT BANKING

Tessa Shaw

The world of investment banking may seem foreign, even forbidding, to outsiders. Yet it is highly attractive to Faculty of Business and Economics (FBE) graduates like Rannia Al-Salihi, and many alumni like Wayne Kent and Matt Wilson have built highly successful careers in the field. I speak with them to find out more about about the path that led them to investment banking, an industry that seems to require endless perseverance, long hours, and talent beyond measure. All three agree that mentoring and being mentored, multi-disciplinary talent, and an aptitude for client service are vital in this intensive yet highly rewarding field.

RANNIA AL-SALIHI BCom 2015

Sitting with a coffee in her hand, Rannia Al-Salihi looks every bit the university student. Within a minute of talking about her Bachelor of Commerce experiences, however, I realise I am chatting with a rising star. President of the Financial Management Association of Australia (FMAA), she takes pride in educating FMAA members outside the classroom through events such as the Women in Leadership Forum, which is dedicated to discussing the issues of gender equality and diversity in the commercial space. A position in the Citi Investment Banking Summer Analyst Internship cemented her desire to become an investment banker. You were only halfway through the Bachelor of Commerce when you chose to work in investment banking. What attracted you to the industry? Through the FMAA, career counselors, and mentors in some of the senior students, I discovered the world of investment banking, but was still hesitant. However, I was fortunate to be awarded the Women in Banking Scholarship in 2014, which later led me to apply for the role of a Summer Analyst under the Citi Investment Banking Summer Analyst Internship (201415). There I joined an intensive training program and had the opportunity to work on multiple projects as if I were a full-time analyst. When I realised that investment banking fed my desire to be challenged on a daily basis, I knew it was what I wanted.

Do you have any messages for aspiring investment bankers? This is for the girls. Some of the most successful bankers out there are women, not because they are tough, but because they are the most helpful and caring females around. Your mentor relationship can be an informal one: girls tend to band together, and it’s not necessarily a bad thing; in this industry, it is beneficial to have a support group to lean on.

What do you think are the skills one needs in order to work as an investment banker?

You have been offered a graduate role with Citi, beginning in 2016. Congratulations! Where do you see yourself in the future?

It requires a combination of things: – The need to employ a self-check system. This is a career where one can easily get consumed by the industry, so you need to be able to self-regulate. I was in Sydney one morning, taking a stroll on the beach, and bumped into a Managing Director of Citi enjoying his morning run. It showed me that you don’t need to be chained to your desk, and that it is necessary to be able to switch off.

I am particularly excited about working alongside and learning from leaders in Australian business. I also see the changing image of financial institutions, and I want to be part of the change, where hiring processes lead to better reputations and lower costs for the institution.

– Obviously, you’ll need to have an interest in financial markets. It’s not enough to simply be drawn in by the prestige of investment banking.

“ When they say you’ll learn a lot, it’s an understatement!”

– You need to possess highly-developed inter-personal skills. Your presence makes a difference in how your client perceives you, and at the end of the day, you do have a client base that requires looking after.

“ There is no secret recipe, and successful bankers, in my experience, have different personality traits and background experience. But in my view, healthy doses of intelligence, commercial acumen, resilience, a very strong work ethic, drive and credibility are critical. To be successful, you need to harness these attributes to engender trust with your clients.”

MATTHEW WILSON BCom (Hons) 2000, LLB 2001

Matthew Wilson grew up wanting to be a doctor like both of his parents. Then a career as a barrister appealed so he completed a Law/Commerce degree. During this time, the world of finance opened up to him and he decided to pursue a career in banking. Wilson is currently an Executive Director at J.P. Morgan in Sydney. For nearly 10 years, he has regularly returned to FBE as a guest lecturer in Corporate Finance for the Bachelor of Commerce, and recently completed an ‘Executive-in-Residence’ in the Department of Finance. He is an active member of the Finance Honours Alumni Committee. Why do you think investment banking is often regarded as a stressful industry? There is no doubt that investment banking is a demanding profession. There are times when the job can be stressful, but it is episodic—the key to longevity in the profession is to make sure you have ‘gears’ to manage work levels and the physical and psychological demands of the job. There are times when you don’t have to be in fifth or sixth gear—knowing when to take the foot off the pedal (if only for brief periods) is critical to an extended career. However, successful bankers need to be able to function at a high level under pressure—it’s a critical capability.

What is your top tip for students and young graduates who wish to enter or progress in investment banking? It’s general advice, but if you have the good fortune of being able to pursue a profession that you have true passion for, you should do everything within your powers to make that ambition a reality.

Are you a mentor to anyone? I am a great believer in mentor relationships, and am a formal mentor to several junior bankers, and informal mentor to several other staff members. I have been very fortunate to have had a number of fantastic professional mentors, who have helped me with a whole range of topics, including career progression, skill enhancement, network expansion and managing work and home life. Not only have these mentors had a profound influence on my professional career, but I am also lucky enough to consider them very good friends.

Given the demands of the profession, you need to have a real interest in finance and the markets. I encourage students to speak to as many professionals as they can (whether that be through personal networks or via the various networking functions which are now common) to get a better grasp of the profession. That insight is incredibly valuable in helping students size up their career options. If you ultimately become a young banker, the key to progression is to work hard and seek to absorb as much as you possibly can—not only through continually focusing on expanding your work skillset, but just as importantly through asking a lot of questions and observing how more senior bankers conduct themselves, not only with clients but also with colleagues. You can learn a significant amount simply through focused observation.

I firmly believe that staff members need to recognise that they are guardians of an institution—there is an implicit obligation on all senior staff to ensure that a firm’s collegiate environment and culture of inclusiveness and success be reaffirmed in each generation as they progress through an organisation. Our aim is that when those junior bankers become more senior in due course, they will look to do the same with the next generation.

WAYNE KENT BCom, LLB 1985

Wayne Kent is most well-known for having been global head of Macquarie’s Equity Capital Markets (ECM) business. Under his guidance, Macquarie became, and continues to be, one of the top ECM houses in Australia and certain markets overseas. In July 2015, Kent added the role of Vice-Chairman at Credit Suisse Australia to his long list of career highlights and achievements. Why did you get into investment banking? It was the ability to create and deliver outcomes that attracted me to investment banking. While practising as a lawyer, I was fortunate to work under the guidance of leading lawyers like Michael Hoyle. Michael and I had a discussion about investment banking: he was not only a great lawyer but also innovative, and was involved in a lot of the new financing structures around that time.

We all hear comments around investment banking as a career not typically having a lot of ‘work-life balance’. Do you agree? That’s pretty accurate. It’s difficult to work in an environment when your client is going through possibly one of the biggest events in their business life, whether it’s taking over another company or floating their own company, and so they expect you to be fully committed to their business. If you’re not, there will be someone from another firm who is more committed. If a client wants something you need to deliver on that.

The challenge with investment banking is that in involves a lot of pitching and working on things that may not eventuate. It’s a very different environment to law, which is more about working with the one client. He highlighted to me that in investment banking, you would work on ten deals and be fortunate if one of them is successful, or has an outcome.

You need to be passionate about what you’re doing, enjoy it, and not be doing it for, let’s say, the money. Unlike in funds management or broking—where you might get paid commissions for doing a good job—typically, in investment banking you either have success or failure. That just means you need to be committed. However, I think investment banks will change. I think there’s a different definition of work-life balance now, in knowing when there is a need to do something where there’s an outcome for a client, and needing to be present to do that, but that does not mean working until two o’clock in the morning, seven days a week, 365 days a year. There needs to be an environment where people are prepared and committed to work where it’s necessary, but if it’s not necessary then you go home and catch up with your family, or do something else, because you can’t sustain that level of commitment decade upon decade.

One thing that Michael taught me was the importance of relationships. I was drawn to the fact that I could combine relationships with innovation to create successful outcomes for my clients. We’ve noticed that a lot of our successful investment banking alumni have legal as well as commerce backgrounds. Training as a lawyer prepares you to be a critical thinker. Combining a knowledge of finance with the ability to think critically — getting back to what I said before about relationships, innovation and understanding the numbers—you have a broader perspective. A lot of other successful investment bankers are typically multi-dimensional, so whether it’s someone with an engineering or a nuclear physics background, or whatever it may be, having more than one discipline gives them a broader perspective on issues.

“ Do it because you want to, not because you think it’s something you have to do. In investment banking you have lots of ‘no’s’; it’s very competitive and you have to be able to deal with that.” 12

POLITICALLY SMART, ECONOMICALLY STUPID Tax concessions for small business Professor John Freebairn In its May 2015 budget, the Commonwealth Government announced a number of tax concessions for small business. On the assumption that many small business operators are swing voters, the concessions were judged politically attractive, with bipartisan support. However, for an economy struggling to boost lagging productivity, tax concessions that drive employment and investment for just one segment of the business sector will result in significant costs to the Australian economy.

Tax concessions explained

Long term costs outweigh small short term benefits

Under the rubric of ‘Growing Jobs and Small Business’, the Commonwealth Government budget proposed four sets of tax concessions for small businesses with an annual turnover of less than $2 million a year (Budget Paper No.2, Revenue Measures, Treasury).

There is certainly potential for lower effective tax rates for small businesses to encourage higher levels of investment, employment and production. The higher after-tax return will shift some marginal investment options from the category of not financially viable to worthwhile, and the lower tax rate means larger available internal cash flow to fund increased investment. It is even possible that we will also see a boost to ‘animal spirits’ which can augment the investment stimulus. But, in practice not all small businesses will benefit from the tax concessions, particularly those which record negative or zero taxable income in particular years, or, indeed, over extended time periods.

To reduce tax burdens on small business, the company tax rate was reduced from 30% to 38.5%, with the 30% franking rate retained for income distributed as dividends, and a discount of 5% on business income received from an unincorporated business. These lower tax rates are estimated to cost revenue about $1 billion per year. The extended accelerated depreciation rules enable small businesses to deduct from taxable income the purchase cost of capital assets valued at less than $20,000 rather than claim depreciation. Relative to the previous depreciation (15% for the first year and then 30% in following years), immediate write-off can reduce the present value cost of eligible investments and effectively provides an interest-free government loan. More generous rollover relief for capital gains taxation, and an extension of fringe benefit taxation for portable electronic devices, involve relatively small concessions.

The small business tax exemptions distort the efficient allocation of limited resources, add to tax complexity and invite costly gaming behaviour from business trying to fit the eligibility criteria. The revenue cost has adverse second round effects on government fiscal policy. By providing tax concessions to small business rather than to the business sector at large, we are encouraging the reallocation of investment, employment and production from standard-taxed large businesses to concession-taxed small businesses. As a result, some investment, employment and production are reallocated from society higher returns in the large business to relatively lower returns in the small business sector. This loss of efficiency does not happen when small and large businesses face a common tax rate. There are no well-documented market failure reasons for providing a different set of taxes for small versus large businesses. Both large and small businesses invest in plant and equipment, develop new products and better production methods, create jobs and generally contribute to economy-wide wealth. Some individual businesses in both the small and large sectors reduce employment, and some fail. The ‘less than $2 million a year turnover’ definition of a small business eligible for the tax concessions is arbitrary. Why not $1 or $5 billion, or an employment level or taxable income level? This arbitrary level adds to tax administration and compliance costs, and invites costly game playing. Many businesses with an average turnover around the $2 million mark will be uncertain about their eligibility given the several sources of volatility of turnover from year to year. Some, in order to access the concessions, will deliberately hold back expansion. Others will reorganise themselves to increase the chances of being below the turnover threshold, with additional costs to both the taxpayer and tax administrator. Ultimately these concessions have to be funded from somewhere. Funding sources could include; higher other taxes, such as failure to index the personal rate schedule, resulting in higher average tax rates on all employees and a lower consumption expenditure capacity: lower government expenditures on, for example, education and infrastructure to increase national productivity; or, larger government deficits which contribute to higher interest rate expenses, including for small business, and higher future taxes. The politically attractive tax concessions to small business appear beneficial in the short term but the long term economic costs of such an initiative are high and all Australians will bear the brunt.

DECISION NEUROSCIENCE Traversing disciplinary boundaries to advance our understanding of financial decision making Tessa Shaw

Sitting at his desk in the City of London about fifteen years ago, Carsten Murawski never imagined that one day he would be looking at images of brains on his computer screen. As an analyst at a leading US investment bank, his world revolved around mergers, acquisitions and initial public offerings of the world’s largest companies. His job was to help hyper-rational economic agents chase opportunities for returns, and his computer screen was filled with spreadsheets of accounting data and stock prices. “I have always been fascinated by financial markets. But what really fascinates me is the people in those markets. I have always wanted to know how they tick,” he says today. After a few years at the coalface of financial markets, he turned his back on the world of high finance, to explore these markets through research, and later, through science. While working on his PhD at the University of Zürich, he witnessed the beginnings of an exciting new development in finance. Until then, finance research was focused primarily on financial instruments such as derivatives and institutions—mainly, stock markets and companies. Little research existed on individuals, and the models of actors in financial markets were highly abstract, allowing for little variation in individual behaviour. They treated individual decisionmakers as ‘black boxes’, describing what they choose, but not how they choose it.

Left to right: Professor Peter Bossaerts, Dr Stefan Bode, Dr Carsten Murawski

In the late 1990s, new developments in human brain imaging enabled researchers to measure brain activity in a non-invasive way. Economists at the University of Zürich began to utilise this technology to investigate decision-making, connecting economic theories with the underlying neurobiology, establishing links between variations in economic behaviour and biological variations of the decision maker. Over the past few decades, researchers around the world have meticulously documented that humans systematically deviate in many ways from the workhorse theories of academic finance. Evidence shows there is a large degree of variation in behaviour, not just between individuals, but also within individuals over time. Evidently, a lot of this disparity in economic behaviour is related to biological variation.

This evidence that financial decisions could be affected by seemingly unrelated environmental factors was a notion that hitherto was outside of standard economic theories. Today, researchers like Murawski believe that a better understanding of this variation is necessary, not only to improve the financial behaviour of individuals, but also to improve financial markets. To do so, a better understanding of the processes through which financial decisions are made is required.

Soon after joining the Department of Finance at the University of Melbourne in late 2007, Murawski started using laboratory experiments to study a certain aspect of financial decisions: the trade-off between reward size and delay to reward. For example, would you choose to receive $20 now, or $50 later? This is often referred to as intertemporal choice. His main interest at the time was the role context has in making such decisions—what are the factors that will cause someone to alter their choice from $50 to $20? Standard theories assume that decision-makers only consider information that is immediately relevant to the decision, such as the amount of cash received or the delay to receiving it. But people usually make their decisions in a rich environment in which they are constantly bombarded with seemingly irrelevant information. In an early study, Murawski and his colleagues found that even brief exposure to images that people found rewarding (such as the Apple logo)—and that ostensibly were unrelated to the particular financial decisions in their experiment—could systematically influence subsequent financial choices. This signified that an environment brimming with irrelevant information could, in fact, affect the general state of one’s reward system, allowing for bias in the encoding of choice options, resulting in choices being shifted. This evidence that financial decisions could be affected by seemingly unrelated environmental factors was a notion that hitherto was outside of standard economic theories. Having found that they could systematically shift decisions by manipulating the decisionmaker’s environment, the researchers then wanted to determine how this happens in the brain. They teamed up with a group of brain imaging specialists from the Florey Institute of Neuroscience and Mental Health in Parkville, one of the world’s leading neuroscience research institutes. Among them was Stefan Bode, a young cognitive psychologist. During his graduate studies at the Max Planck Institute for Human Cognitive and Brain Sciences

in Leipzig, Germany, Bode used sophisticated statistical techniques, which allow for the prediction of decision outcomes from studying patterns of brain activity as measured using functional magnetic resonance imaging (fMRI). Using these methods, the team was able to identify brain regions in which the representation of choice options changed due to the processing of briefly presented (16 milliseconds) rewarding images. This means that activity in these brain regions allowed them to predict how impulsive the financial choices that followed would be. This insight further piqued the team’s curiosity. They now wanted to discover the type of visual stimuli that could affect financial decisions, and whether people are affected in different ways by their environment. Bode, Murawski and Daniel Bennett, a Psychology PhD student, used electroencephalography (EEG) to measure the brain activity of participants who were exposed to a variety of positive images. While the images were displayed (this time for 3.2 seconds) in the background, the participant’s attention was directed to an unrelated task on the screen, comparable to a simple computer game. This scenario is similar to everyday situations in which people passively consume advertisements or other stimuli in the background. At the conclusion of the experiment, participants were shown the images and had to rate them on a number of dimensions, including how arousing they found the individual images to be, or to what extent the images made them think of the present or of the future. It is important to note that the participants were not aware that they would be asked to rate these images at the end of the experiment. Using the same statistical techniques as in their previous study, the researchers found that they could indeed predict people’s attitudes towards these images from the brain activity recorded earlier. “This indicates that the brain automatically extracts various kinds of information from visual stimuli in the environment, some of which we never become aware of, but which may indeed be powerful enough to affect unrelated decisions thereafter,” Bode explains. “This is interesting because we are constantly exposed to some kind of stimulation in our environment, but how and under what circumstances our decisions are influenced by the different stimuli we encounter, we don’t know yet.”

Today, this research at the intersection of economics, psychology and neuroscience is referred to as decision neuroscience. Its aim is to provide a biological foundation for our understanding of decisions, including economic and financial decisions. Such research is highly complex and requires the close interaction of specialists from different academic disciplines.

“This indicates that the brain automatically extracts various kinds of information from visual stimuli in the environment, some of which we never become aware of, but which may indeed be powerful enough to affect unrelated decisions thereafter.”. In 2011, Bode, now in the Melbourne School of Psychological Sciences, and Murawski set up the Decision Neuroscience Laboratory, a cross-discipline partnership between the Department of Finance (Faculty of Business and Economics) and the Melbourne School of Psychological Sciences (Faculty of Medicine, Dentistry and Health Sciences). Bode and Murawski, together with PhD students, work on fundamental aspects of decision-making such as learning about uncertainty, the perception of time, and intertemporal choice. They work closely with other laboratories and institutions, like the Cancer Council of Victoria, allowing their fundamental research to inform solutions to economic and health problems including retirement savings, obesity, pathological gambling and certain mental illnesses such as obsessive-compulsive disorder.

These findings have substantial implications beyond financial decision-making, as they could help advance our understanding around unhealthy choices. For example, in a joint project with Annette Horstmann at the Max Planck Institute in Leipzig, Germany, the team found that decision-making in obese people is more susceptible to environmental influences than in lean, healthy individuals. In the hope of using these insights to improve decision-making in highrisk populations for obesity, Bode and Murawski recently partnered up with Melanie Wakefield at the Cancer Council of Victoria to develop new obesity prevention strategies in Australia.

Last year, Peter Bossaerts, one of the pioneers of decision neuroscience, joined the Faculty of Business and Economics. In the 1990s, at the California Institute of Technology (Caltech), Bossaerts was one of the first to use laboratory experiments to study financial decisions and markets, later becoming part of a small group of researchers who started using brain imaging to study human decision-making. His initial work was centred on the encoding of various aspects of risk in the human brain. He conducted numerous ground-breaking studies in this area, many of which inspired new research within finance, neuroscience and psychiatry. Bossaerts, together with colleagues at Caltech and Yale, has also been uncovering the neural basis of theory of mind—our ability to attribute mental states to oneself and others, a skill vital for social interaction. Deficits in theory of mind have been associated with a range of mental illnesses including autism spectrum disorder, attention deficit hyperactivity disorder and schizophrenia.

“Ultimately, economic outcomes are the result of actions by individuals. And these individuals are biological organisms, with bodies, minds and brains,” says Murawski. For a long time, the research strategy in economics and finance was to abstract from the organism, and even from the individual. While this strategy has been successful in some respects, it has failed in others. “There are many important financial phenomena we don’t understand, like bubbles and crashes, and gigantic financial problems for which we have effectively no feasible solutions, such as the retirement savings gap. I believe that the key to solving many of these problems lies in a better understanding of how individuals make decisions. And decision neuroscience provides the appropriate tools to gain this understanding.” For further information visit dlab.unimelb.edu.au

...this research at the intersection of economics, psychology and neuroscience is referred to as decision neuroscience. Recently, Bossaerts and his collaborators investigated how a person’s development of theory of mind affects behaviour in a financial market. They found that people with more developed theory of mind—that is, people who are better at reading other people’s intentions—are more susceptible to riding a bubble in financial markets. This shows that a skill highly beneficial in our day-to-day interaction with other individuals—and indeed a defining aspect of our humanness—can, in fact, work against us in financial markets. It also shows that decision neuroscience not only improves our understanding of individual behaviour but also provides important insights into the behaviour of markets.

FINANCIAL LITERACY STARTS AT SCHOOL Niamh Cremins

Financial literacy levels in Australia are relatively low, yet Australians are increasingly forced to take more responsibility for their financial futures, in particular planning for retirement. Ongoing research is attempting to determine the best way to improve financial decision-making and long term behavioural outcomes. One promising avenue is early intervention to improve awareness and understanding of financial matters among young people, aimed at bringing about sustained behavioural change.

Street Finance is a pioneering Bachelor of Commerce (BCom) subject that combines education, community engagement, and research, to address the financial challenges facing young Australians today. Combining expertise from the Faculty of Business and Economics (FBE) and the Melbourne Graduate School of Education (MGSE), Street Finance equips finance students to teach secondary school pupils in diverse communities the skills they need to navigate the ever complex financial world of bank accounts, debit cards, mobile phones and online shopping. Senior Finance Lecturer, Dr Carsten Murawski, who designed the course with colleagues, Professor Carole ComertonForde (FBE) and Catherine Reid (MGSE), says that one quarter of 12 to 20 year olds in Australia have had some form of financial debt, with young people from disadvantaged backgrounds at particularly high risk of encountering financial troubles. “Often financial dilemmas are consequences of a lack of information or misinformation about financial products,” says Dr Murawski. “These early financial mistakes can sometimes have long lasting effects on a young person’s future. Street Finance is unique in its potential to engage students at an early age and investigate the impact of early intervention for long term behavioural change in financial management.” Over eight weeks, the BCom students learned about key financial concepts and received expert training in lesson planning and delivery. “The students who enrolled were passionate about improving financial literacy and getting the best possible outcome for the local communities,” says Professor Comerton-Forde. “And, the cross-discipline partnership with MGSE provided the expert knowledge in lesson design required to make Street Finance a success.”

Practitioners also joined the teaching team to provide an additional layer of industry and public policy relevance. Gerard Brody, CEO of Consumer Action Law Centre, presented a guest lecture on consumer rights, as well as financial counselling and legal advice, and Gillian McIlwain, Research and Policy Manager at Good Shepard Microfinance, provided an overview of the scope and complexity of the finance issues people face. The BCom students then delivered three lessons on basic financial knowledge in high schools in Victoria, covering topics relevant to 15 – 17 year olds including budgeting, savings, credit, mobile phones and bill shock, and consumer rights. BCom student Daniel Odoi participated in the inaugural semester of Street Finance because he wanted to complete his undergraduate degree with a unique subject experience. “I am passionate about mentoring, educating and empowering young people,” says Odoi, “and I truly hope I was able to motivate and mobilise my students, so that in the future they will make more confident financial decisions and achieve financial independence.” While the topics covered resonated with the teenagers, the classroom environment uncovered other significant issues that are influencing young peoples’ financial decisions. According to Comerton-Forde the finance space is evolving quickly. “We are reviewing the content for next year based on what we learned in the high schools during the pilot,” she says. “In particular we will include new payment apps and PayPal, which make online purchasing easier than ever.”

“ These early financial mistakes can sometimes have long lasting effects on a young person’s future. Street Finance is unique in its potential to engage students at an early age and investigate the impact of early intervention for long term behavioural change in financial management.” Enhanced financial literacy can be assessed in terms of understanding, awareness and behavioural change. The research component of the project will be conducted from 2016 to determine the efficacy of Street Finance over time. All pupils in the participating classes will be assessed on their financial knowledge, attitudes and behaviour, before and after the lesson, and the results compared with pupils who did not receive a lesson from the BCom students. A follow-up assessment approximately six months after the lesson will determine the long term value of such curriculum in financial literacy and go some way towards understanding how teaching may influence financial behaviour over time. “Early intervention education is one of a number of avenues to systematically change peoples’ behaviour,” explains Murawski. “We don’t know what the real impact will be but we are eager to advance knowledge in this area and help improve financial literacy.” The learning outcomes of the Bachelor of Commerce students will also be analysed using the same evaluating framework. Experiential learning is a proven teaching method across many disciplines, particularly medicine and law, but is a relatively new concept in finance. According to Catherine Reid, Lecturer in Language and Literacy Education, the commerce students’ feedback has been positive in terms of how Street Finance enabled them to develop their subject knowledge. “Learning a subject so that you can teach it to someone who knows nothing about it requires a deep understanding of that subject matter,” explains Ms Reid. “The students also developed exceptional communication, organisational and leadership skills vital to lesson delivery.” Odoi agrees and while delivering his lesson was challenging, it was also extremely rewarding. “It was important to deconstruct financial concepts, articulate, and then translate them into relevant class material that the students could connect with,” he says. “Through the lesson prep and delivery, I reinforced my own understanding of financial concepts and challenged myself to review my own budgeting and financial goals.” Street Finance will be offered again in 2016.

JOURNEYS HOME

Ending the cycle of homelessness Dr Yi-Ping Tseng

As homelessness in Australia continues to rise, long term intervention strategies are required to combat the consistent churning in and out of homelessness that many front line organisations regard as one of their biggest challenges. CONTINUE OVERLEAF

The Melbourne Institute of Applied Economic and Social Research has released the largest and most comprehensive longitudinal survey of homelessness in Australia. The Journeys Home Survey, commissioned by the Department of Social Services, tracks movements of homeless Australians, and those deemed at high risk of becoming homeless, over a two and a half year period. Most homelessness studies only include samples that are homeless, but Journeys Home also includes people identified as at risk through Centrelink. Detailed respondent information was collected at six monthly intervals. This unique data enables us to better understand the risk and protective factors associated with homelessness over time—vital in breaking the cycle of chronic homelessness. The research has identified significant levels of cycling in and out of homelessness. Three in five of the Journeys Home participants experienced homelessness during the survey period. Although homeless spells are typically not very long—four month median duration according to research by Cobb-Clark et al—multiple spells are relatively common. Of those experiencing homelessness, almost 40% experienced more than one homeless spell. In fact, more than 90% of Journeys Home respondents had experienced homelessness prior to the commencement of the survey.

Understanding movements in and out of homelessness The most recent Journeys Home research report shows that those who experienced recent trauma, such as victims of physical or sexual violence, and those who experienced relationship breakdown or the death of a spouse or child, were more likely to enter homelessness in the next six months and less likely to exit if they were already homeless. Substance use is also an important risk factor. Drug users, in particular regular cannabis users, and/or risky drinkers were more likely to enter homelessness and less likely to exit once they became homeless. The relationship between criminality and homelessness is complicated. Those who have been in recent contact with the justice system—for example. held overnight by the police, on parole or recently in court—have quite low rates of exit. This is particularly striking compared with the recently incarcerated, who have demonstrated high levels of exit. The association between criminality and cycling in and out of homelessness could be related to moving between states of homelessness and incarceration over time. Family support is an important factor in preventing homelessness, as well as in assisting individuals out of homelessness. There are also signs that support services are successful in assisting targeted groups out of homelessness. For example, women, in particular those with resident children, are much more likely to exit homelessness than men. People who were diagnosed with pressing health conditions also tend to exit homelessness faster than others. In general, young people cycle in and out of homelessness most frequently but older respondents, once homeless, tend to remain homeless for longer periods. The level of disadvantage, such as poor health, mental illness, low human capital and so on are distinguished by lifetime duration homelessness and require the highest level and longevity of support to break the cycle. The complete findings from waves one to six of the Journeys Home Research Report No.6 is available for free download: melbourneinstitute.com/journeys_home

The prevalence of chronic homelessness cycles raises important policy concerns and serious implications for service providers. Understanding the factors that lead to homelessness and the supports required to exit will help inform comprehensive policy and effective service intervention.

RESEARCH MEETS INTERVENTION Niamh Cremins

The Melbourne Institute is actively engaged in partnerships to address such issues and concerns as those raised in Journeys Home. Journey to Social Inclusion (J2SI) is a pilot programme designed by the Sacred Heart Mission to provide intensive support to break the cycle of chronic homelessness. As part of the J2SI research team, Yi-Ping Tseng, in collaboration with RMIT’s Guy Johnson, has been analysing how intensive support across vital services could assist people to move out of chronic homelessness and remain housed in the long term, as well as examining the associated economic implications. During the pilot, the J2SI program delivered intensive and individually tailored support, rapid access to permanent housing, therapeutic services to address trauma, and a skills building program to equip participants with life skills and assist them in reconnecting with the mainstream community. CEO of Sacred Heart Mission, Cathy Humphrey, says the purpose of the pilot was twofold— to achieve successful outcomes for the participants and to provide a solid evidence base to inform policy reform. “The pilot allowed us to test the model to determine associations between such service delivery, as well as both individual and financial outcomes,” Humphrey explains. Using randomised controlled trials, the researchers tracked and compared the outcomes of 40 J2SI participants with an equivalent group of long term homeless people who were supported by existing services. Participants in the J2SI test group demonstrated improved physical health and their use of emergency, general and psychiatric hospital facilities decreased by 80% over the 48 month period. Labour force participation increased but quickly began to decrease after the pilot concluded.

The evaluation results show that after three years in the pilot programme, 85% of participants were housed compared to 41% from the control group. However, in the 12 months following its closure the proportion of J2SI participants who were housed dropped to 75%. This is still substantially higher than at baseline, and compares favourably with international studies, but suggests that high risk individuals require the level of ongoing support of a program like J2SI if they are ever to effectively break the cycle of chronic homelessness. Homelessness is not just a social issue, but an economic issue, and while the economic benefit at the 48 month mark is modest at approximately 25 cents in every dollar, it is trending upwards. The mortality rate over 10 years, calculated using benefit cost ratio, could be as high as $1.32 for every dollar, says Humphrey. Studies show that current public policy is costing conservatively $30,000 to $35,000 a year for each person trapped in long term homelessness. “Even if you take compassion out of the issue,” says Humphrey, “and look at it from a purely economic perspective, the current approach to long term homelessness doesn’t make sense. What we have seen through J2SI is that, with the right support, people can break the cycle of long term homelessness in Melbourne.” Sacred Heart Mission is realistic about the challenges ahead. A lifetime of entrenchment, disadvantage and homelessness cannot easily be overcome but the positive benefits of intensive service support, demonstrated through J2SI, make the light at the end of the tunnel just a little brighter. “The rigour of the research ensures we are getting gold standard evaluation that will inform future intervention and, in the long term, policy change,” says Humphrey. The next phase will see the J2SI programme replicated across other geographical locations and scaled up to include a broader sample. “To achieve sustainable outcomes we need to secure a sustainable funding model,” continues Humphrey. “To secure government and philanthropic support it will be vital to provide robust evidence of the economic benefit of these interventions for government and the community; to demonstrate a measurable social return. Only then can we create and adapt a model all across the country and make serious headway in ending chronic homelessness in Australia.” Journey to Social Inclusion research reports are available online: sacredheartmission.org/understanding-homelessness

TOP TIPS FOR ENTREPRENEURS Running a business and being your own boss sounds great but the road to success can be rocky. In the increasingly crowded world of business start-ups, how can budding entrepreneurs make themselves stand out from the crowd and achieve bottom line results?

Start; don’t wait for the perfect moment. Start! You have ‘permission’—you don’t have to be an accountant or doctor. The freedom to do and to create what you want is amazing. It doesn’t compare to being employed. In fact, if I knew how much fun it was I would have started earlier.

Business and Economics alumnus, Tom Griffith is one half of the successful health food giant, Emma & Tom’s. Tom identified a gap in the Australian market for healthy and tasty fruit smoothies with no artificial additives but needed a partner with science and foodie know-how to match his business acumen. He found his partner in childhood pal, Emma Welsh, an alumna of Agricultural Science at the University of Melbourne, and in 2004 they launched Emma & Tom’s. In little over 10 years the company has grown from strength to strength and now distributes their market leading Australian healthy drinks and snacks across Australia’s top 2,000 cafés and delis, and in both Coles and Woolworths nationally. Here, Tom shares his top tips for budding entrepreneurs.

Be frugal, make more than you spend It doesn’t have to cost a lot. Boot strapping is good for you and you need to be prepared to do lots of it. Overnight success is rare; you need to expect this and budget for it. It’s taken us 10 years and even now we still need the energy and drive we had on day one.

Get great people on board

The best resource for a start-up is a network of great people. They might be business partners with complementary skills and knowledge, like I found in Emma; or employees or investors. They may simply be people you encounter along the way. Take advice, daily, from anyone.

Re-assess your business model regularly

Now that you’re in business, you have to understand that there are no boundaries. Re-evaluate your processes, operations and marketing regularly and take notice of what your competitors are doing to make sure you’re always ahead of the game.

Your product or service must be fantastic

The best way to stand out from the crowd is to offer consumers something truly outstanding. Identify your unique selling point early on and stay true to that brand identity, even as your model adapts to marketplace demands.

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Be driven, otherwise, get a job

MELBOURNE LAUNCHES MASTER OF ENTREPRENEURSHIP

Chris Parkes

Melbourne has a thriving entrepreneurial community, with a powerful combination of scientific research, high tech design and manufacturing, and innovative thinkers. Australia’s newest and most advanced entrepreneurship training, located at the centre of Parkville’s investigative hub, builds on this long ingrained pedigree. Melbourne is an extraordinary education and investigative ecosystem, where the continuous supply of new discoveries and ideas blends harmoniously with a culture of early adoption of technology and new service. This, together with its research capabilities, has seen Melbourne foster dynamic biotechnology, medical technology, engineering and ICT sectors over the last three decades. As Australia becomes less manufacturing intensive and the economy continues to transform, innovation and entrepreneurship will be key drivers of economic stability.

The University of Melbourne is playing an important role in the development of that entrepreneurial culture. Over the last decade it has built its own entrepreneurial cluster that includes Carlton Connect, the Melbourne Accelerator Program (MAP), the School of Engineering, and Melbourne Business School, fostering strong connections between research and business and accelerating the launch of multiple start-ups. The resurgence of the entrepreneurial spirit and the DIY enterprise is indeed transforming the business landscape globally. What has been lacking, however, is the formal, practical skills to give these new business ideas and ambitions the best possible start. In response to the adjusting business landscape, Australia’s newest and most advanced entrepreneurship training will be offered from 2016 by the University of Melbourne, located at the custom built Wade Institute for Entrepreneurship at Ormond College. The practical, one-year University of Melbourne Master of Entrepreneurship degree will produce graduates who are ‘start-up ready’. The Master of Entrepreneurship will equip students with the knowledge and skills to develop and launch innovative new businesses, successfully commercialise products and services, and devise successful business models. Students will be mentored by entrepreneurs and gain hands-on experience in prototyping new products and services, running a pop-up business, and developing a start-up business idea to pitch for real venture capital. The Wade Institute for Entrepreneurship (render below), designed by Lovell Chen, will provide a unique environment for budding entrepreneurs to unleash their creativity. Underpinned by the design philosophy that to teach people how to create, make and innovate, the space they occupy must invite them to create new things from the moment they walk in, the building will have no limitations. As student ideas evolve, so can the spaces they inhabit. To help this transformation, the building can turn inside out. Rather than only accessing rooms internally, the cloisters enable perimeter doors, creating an active external face to the start-up spaces. In their downtime, students will be able to climb up onto the roof of the building, where they will find an outdoor sport, recreation and performance space. Find out more about the Master of Entrepreneurship: fbe.unimelb.edu.au/entrepreneurship

NINE STEPS TO FINANCING YOUR START-UP “I won’t ever forget the agony of waiting for the first sale—it was excruciating,” says Founding Director of redballoon.com. au and Shark on Network TEN’s business reality program, Shark Tank Australia, Naomi Simson. It took two months and four days for RedBalloons’s first order to finally arrive. Today the company boasts sales of over two and a half million experiences. While Simson still wonders why she didn’t give up, the truth is that it never occurred to her, and she says it should never occur to you. Often, to start or grow a business, we need to find money, skills and contacts— and finding the right investor is vital. Naomi reveals the nine truths about asking for money.

If you want someone’s money, research who you’re pitching to Every potential investor has a different reason for investing. Do the work and find out as much as you can about the people behind the ‘investor’ label. What do they believe in? What is their background? What is their expertise? People do business with people, and investors invest in people.

Understand your customers An idea is only an idea until someone is prepared to pay money for it—then it has the potential to be a commercial product. Asking friends and family is not research (although it’s a good start). In the tech world, we have what is called minimum viable product—we ship ‘beta’ product to get customer feedback.

Understand different valuation models

If you are pitching an equity deal based on future potential sales, then you need to be clear on why this is so and have a demonstrable track record. If you’re valuing your business based on current top-line revenue, know and show similar valuations in your industry. Too many times we saw people pitch with a valuation that was all about ‘hope’—investors don’t buy hope as a sustainable strategy.

Take your customers and potential investors on a journey

I’ve been known to say, “It’s just business”, but what I’m really saying is, “It’s not just my money: it is my time, my reputation and my commitment that you are asking for.” Make sure your pitch is filled with facts and numbers. More than anything, you should be someone they can believe in.

Tell us about the team I have seen investments made, dependent on a founder finding a co-founder. Often we can see that a founder brings certain skills but might well need some others to be able to scale the business. The reality is that without a team around them, and a proven record of his or her ability to attract, lead and inspire a team, the investment can be vulnerable. I like to know how they recruit, how they reward, and how engaged the team is. I look at the tools that they are using (so many are cloud based) such as redii.com.

Discover everything possible about the industry It is unlikely an investor will know as much as you about the industry and market you’re in (putting a Facebook page together to ‘test’ the industry Don’t give up! is not what I mean here). How big is the industry? How many competitors are there? Is it a new Some of the best advice I was given was simply, “Don’t give up; if it was market or existing? Know your market and know its easy everyone would do it.” However, it is important to know the difference potential. between persistence and pig headedness.

Deeply understand your numbers and cash flow If you’re not a numbers person, practise and work out tools to remember them. There is no room for rounding! Key numbers to know are the cost of acquisition of a customer, the cost to serve a customer, the number of unique customers, conversion rates, and of course the obvious ones— cash burn and time to profit at current run rates pre and post investment.

Deal with the details

If necessary, get trademarks, patents, registrations, licences and approvals. No investor will be interested in taking on a business that has any potential litigation; so make sure you have tied up every loose end before seeking investment. Never underestimate prospective customers— they will do their due diligence too. It is about building trust.

CREATING THE PLACES YOU WANT TO WORK Peter Gahan, Sarah Fortuna, Jacob Workman, Jesse Olsen and Niamh Cremins discuss the future of work in this special feature from the Centre for Workplace Leadership. workplaceleadership.com.au

WHAT WILL IT TAKE TO LEAD THE FUTURE OF WORK? Professor Peter Gahan

The future of work is a major strategic issue facing governments, corporations and communities. Developments are occurring at a rapid pace, and are far reaching. Automation and intuitive technologies are making many jobs and occupations that have been around for years obsolete, and creating new jobs that just a few years ago seemed alien, as well as transforming many existing jobs in unexpected ways. Technology presents amazing possibilities to free us from the drudgery of repetitive work tasks and challenges our perceptions of skilled and meaningful work. It is both exciting and scary.

Technological change is also altering our understanding of the workplace. For many of us, the workplace is no longer just a physical place we go to each day. It may remain an important base to which we return but it is increasingly a mobile place that can change depending on the task, or who we are working with. It could be a cafĂŠ, someone elseâ&#x20AC;&#x2122;s workplace, our home, or even a shared work space. Even if we do continue to go to the same workplace on a daily basis, architects are reinventing how workplaces are designed. New technologies facilitate innovative ways of communicating and collaborating.

Leadership in disrupted environments also centres on building and maintaining collective resilience. 28

But the future of work is not just about technology or physical workplaces. We know that people perform best at work when they are given a greater sense of purpose, a range of job tasks that are meaningful and engaging, and when they work with, and for, others who they connect with and share common values. Not surprisingly, therefore, a key to understanding the people dimension of the future of work is to understand how many of these bigger changes are altering the challenge of effectively leading teams and organisations. To discuss just what it will take to lead the future of work, I led a panel of inspiring industry leaders at the 2015 Future of Work conference, including Dale Fisher, CEO of the Peter MacCallum Cancer Centre, Dan Swinney, Director of the Chicago Manufacturing Renaissance Council, Simone Carroll, GM of People and Brand at REA Group, and Deb Eckersley, Managing Partner of Human Capital at PwC.

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The leaders, bringing experience from a diverse range of challenging and dynamic organisational settings, highlighted an enduring cornerstone of effective leadership â&#x20AC;&#x201C; providing people with a clear sense of purpose and an understanding of why the organisation exists and why it is a worthwhile place to work. All agreed on the developmental role of leaders as making sense of the external environment, clearly communicating this, and providing a sense of how the organisation can effectively navigate challenges. Leadership also often involves creating space for others to perform and ensuring that the many different performances cohere into something much greater. Leadership has many enduring qualities no matter what the future might hold, but it is clear that the future will see the task of leadership change. Dale Fisher observed that the very fact that the future is impinging on work and how organisations operate now means that the task ahead is to create an environment for adaptation and reinvention. These, according to Simone Carroll have become permanent features of the business landscape. Increasingly, values become critical assets in managing change and it is these values that provide the guiding principles that enable organisations to navigate change. Leadership in disrupted environments also centres on building and maintaining collective resilience. Dan Swinney spoke of what has proved to be an amazingly effective program designed to rebuild Chicagoâ&#x20AC;&#x2122;s manufacturing sector. Working with government agencies, local community, businesses and unions, the Manufacturing Renaissance Council has created a local environment to enable the city to generate a growing number of manufacturing jobs and opportunities. It has worked with disadvantaged communities to address social issues and build

the confidence of business to invest in those communities. The Council has received international attention for this new model of manufacturing, which drives creative solutions to enduring social and economic problems. As panel facilitator, I learned that leadership is above all a human activity â&#x20AC;&#x201C; an act of individual selflessness, enabling other to make sense of an increasingly turbulent, ambiguous world.

RESPONDING TO 21ST CENTURY CHALLENGES REQUIRES 21ST CENTURY LEADERSHIP

Sarah Fortuna and Jacob Workman

In 1995 the Karpin Report delivered comprehensive insight into Australia’s workplace leadership and provided recommendations on how to best develop business leaders. The report recognised the need for a robust ‘enterprise culture’ and spoke of ‘leadership competencies’ beyond traditional management. Twenty years on, how are we going? It is no secret that Australian workplaces are facing significant challenges. From productivity slumps—the most recent International Monetary Fund (IMF) assessment of the Australian economy, forecast Australian GDP growth to underperform against the G7 average in each of the next five years; to the waning of the resource investment boom and sharp falls in the terms of trade; to an ageing population and drastic shifts in both the workforce and the ways in which we work. What we need now is a dynamic response that entails learning, investment and innovation. What we need now is 21st century leadership capability.

In today’s workplace, leadership will not reside in senior management alone, but will come from better interactions between managers, work teams, and employees. But, in our contemporary world, characterised by rapid change, leadership is becoming an increasingly complex concept. On a global scale we are more interconnected than ever before. Economies have become more integrated; the flows of goods, services, capital and people have become greater. The economic and social ties that bind our economy to the Asian region in particular have never been stronger, especially as newly developing and transition economies have accounted for an increasing proportion of world production and trade. This contemporary world is volatile, uncertain, complex and ambiguous; or in consultant parlance, ‘VUCA’. Australian entrepreneurs and businesses, consequently, now face greater competition and more uncertainty about their future sources of competitiveness and growth opportunities than at any point in history. This is daunting stuff! Our leaders need to be comfortable stepping up to the challenge of this VUCA environment.

21st Century leadership requires a very different set of management skills and capabilities than the command and control school of yore. It will require our leaders to be flexible, adaptive and transparent. We need leaders who can drive employee engagement, collaborate both within and between organisations, and develop and empower their staff; leaders who can mobilise change and focus on the future, whilst navigating the complexity surrounding them; leaders who can exercise knowledge and judgment to create a shared vision and drive organisational goals. We need people who can lead themselves, their teams and their organisations with strategy and conviction while maintaining and actively displaying the core values of enterprise. Donâ&#x20AC;&#x2122;t worry, it is entirely unreasonable to expect one person to master all of these principles; leadership is a team effort. But if we all make incremental improvements and slowly build our repertoire, it will make a huge difference to not only our own working lives, but those of our colleagues as well. We will each spend, on average, between 80,000 to 100,000 hours in the workplace. We want to make those hours as productive, positive and fulfilling as possible.

Australiaâ&#x20AC;&#x2122;s prosperity is increasingly dependent on the creativity of individuals and their ability to work collaboratively. We are transitioning from production to service to knowledge and, now, toward the creative economy. In todayâ&#x20AC;&#x2122;s workplace, leadership will not reside in senior management alone, but will come from better interactions between managers, work teams and employees. It permeates throughout an organisation; we all can become better leaders. As Karpin identified two decades ago, Australia requires better leadership capabilities. Are you ready to lead? The Centre for Workplace Leadership is committed to advancing leadership knowledge and practice in Australia through research, training and events. Jacob Workman is leading a team in the development of the Australian Leadership Capability Standard, a rigorous, evidence-based framework that describes the leadership capabilities, skills and behaviours that drive workplace performance. This tool will be made freely available online so that everyone can better understand themselves and become a more effective leader. As we go to print the team at CWL are preparing the beta launch of LeaderShift, an online leadership assessment and development tool that enables both individuals and businesses to develop leadership capability, even in time and resource poor environments. Visit workplaceleadership.com.au to find out more.

DIVERSITY, MEANS , DIFFERENCE,

SO WHY TREAT EVERYBODY THE SAME? Dr Jesse Olsen and Niamh Cremins

Diversity has become the new buzz word in business, but what does it really mean? Dr Jesse Olsen from the Centre for Workplace Leadership argues that there are significant differences in how organisations realise and manage diversity, and not all approaches are founded in fairness and equality. We live in an increasingly diverse society yet we continue to hear about the gender pay gap, glass ceilings, racial discrimination and stereotyping. Globalisation and immigration trends suggest that demographic diversity will continue to increase, so we need to better understand the value of diversity and how different individuals and groups might work together in the business environment. Leaders and human resource managers of most organisations would tell you that they value diversity. However, despite the diversity buzz, most organisations still have a long way to go before they can be considered truly equitable. The persistent gender pay gap is a well-known example, as are the continuing employment barriers for older workers. More recently, research by the Melbourne Institute suggests that there are significant gaps in earnings for gay men, particularly those who are openly gay.

Management research supports the arguments for having a diverse workforce, but only if diversity is managed properly. Diversity has been shown to increase access to diverse markets, enhance capabilities in decision-making and innovation, and ultimately improve bottom-line outcomes. The benefits of diversity for both individual employees and the organisation are commonly accepted, but there is a gap in understanding how we manage diversity to yield the most beneficial outcomes. My co-author at the University of Texas-Austin, Dr Luis Martins, and I have identified six approaches to diversity management based on why diversity is valued and how different individuals and groups are brought together at work. First, do we think diversity is important because it is of intrinsic valueâ&#x20AC;&#x201D;as simply the right thing to do; or because it is of instrumental valueâ&#x20AC;&#x201D;as something that will help us to achieve organisational goals? Organisational diversity management approaches may vary depending on whether they hold diversity as a terminal value (diversity as the right thing to do), an instrumental value (diversity as good for business) or a dual value (diversity as both the right thing to do and as good for business).

ACCULTURATION STRATEGY

VALUE TYPE

TERMINAL

(“Diversity is just the right thing to do”)

(“Diversity is good for business”)

INSTRUMENTAL

BOTH (DUAL)

(“Diversity is the right thing to do and is good for business”)

ASSIMILATION

INTEGRATION

(“Conformity is important”)

(“Differences are important”)

TERMINAL ASSIMILATION

TERMINAL INTEGRATION

INSTRUMENTAL ASSIMILATION

INSTRUMENTAL INTEGRATION

DUAL-VALUE ASSIMILATION

DUAL-VALUE INTEGRATION

Model of diversity management approaches by Jesse E. Olsen and Luis L. Martins, first published in the Journal of Organisational Behaviour, 2012

Next, we must consider how different individuals and groups are brought together at work. It is commonly expected that society’s diversity will naturally be reflected in the workforces of organisations that strive to eliminate overt discrimination and treat all employees the same. However, treating employees of a diverse workforce the same is not equivalent to treating them equally. In fact, in most cases, ‘same’ treatment will be quite unfair. It is also important to note that treating employees differently is not equivalent to treating them discriminatorily. This all-too-common strategy of treating employees ‘the same’ is known as a strategy of assimilation and entails everyone’s conformity to the dominant organisational culture. Alternatively, an organisation may use a strategy of integration, which respects and encourages the expression of individual differences while treating everyone equally and even allowing for changes in the organisational culture. In general, we argue that a dual-value integration approach best equips an organisation to leverage diversity towards its objectives while maximising the well-being of all members of its diverse workforce. However, diversity management programs cannot simply be copied and pasted from one setting to another. They must be carefully designed, customised and framed according to the context.

In the midst of globalisation, international and multinational organisations face significant challenges in this area, as centralised diversity management programs may be inappropriate for many regions in which they operate. In a recent cross-national study, my colleagues and I analysed the effects of gender diversity programs on women’s evaluations of organisational attractiveness in the United States and France. While the US tends to historically emphasise equal employment opportunities and a woman’s right to work, France has historically placed more emphasis on the well-being of the family. These predispositions and values played out in the respondents’ views of the organisation. Cultural, historical, legal and other contextual factors are vital in determining appropriate diversity management strategies. Diversity is not just a buzz word, and it will shape the future of work. Effective diversity management will deliver workplaces that are integrative, inclusive and just.

THE REALITY OF A LOST DECADE Niamh Cremins Only during wartime has government debt in advanced economies been at a higher level than it is today. Seven years after the Global Financial Crisis (GFC) many advanced economies have barely begun to recover, particularly in Europe where many countries are still dealing with high unemployment, deflationary tendencies and debt overhang. The favourable global environment has taken a turn for the worse, as commodity prices have declined and the strengthening US dollar has raised debt servicing burdens for many emerging markets. Thought leader in international macroeconomics and Minos A. Zombanakis Professor of the International Finance System at Harvard Kennedy School, Professor Carmen Reinhart mapped the challenges for advanced and emerging markets towards global economic recovery in the 2015 David Finch Lecture at the University of Melbourne.

A snail’s pace recovery Of the twelve countries that experienced very severe systemic banking crises in the GFC, only two—the US and Germany—have now recovered to their pre-crisis level. The International Monetary Fund (IMF) projections suggest that even by 2021, Italy and Greece will be nowhere close to the per capita income levels of 2007. Comparing the aftermath of the most recent GFC to the worst 100 crises since the 1860s, Reinhart, in her address, says that the current situation, while not the worst in terms of the magnitude of output decline, is arguably the worst the world has seen in terms of recovery duration. “The concept of the lost decade is not just a concept,” says Reinhart. “It’s looking a lot like a reality.” The most recent GFC followed a common trajectory of high debt growth before a crisis, but this was followed by only limited deleveraging after the crisis. Where sharp deleveraging is achieved post crisis we have seen regions recover at a faster rate. Such was the case of the Nordic financial crisis in the early 1990s and Asian crisis of 1997. The simultaneous occurrence of economic downturn across a large number of advanced countries, coupled with an inability to allow the exchange rate to adjust and regain competitiveness in Eurozone countries, as well as a dearth of credit in affected countries, all significantly slowed potential recovery. A sharp rise in public debt, resulting from governments assuming private debt, created a severe decline in bank credit for economic activity, even in terms of working capital. Public debt as a percentage of GDP is now at its highest level since World War II.

The rocky road to recovery

Emerging markets—the hidden risk

Reinhart argues that recovery will require additional tools that go beyond traditional structural reforms and austerity measures. A recent study by the IMF demonstrates a significant shift of debt from private to official hands.

While the GFC produced a very significant downturn for emerging markets, recovery was quick. Facing low and stable international interest rates, very high and rising commodity prices, and benefiting from rapid double digit growth in China, emerging markets became increasingly attractive international investment opportunities. However, credit booms and increasing asset prices often result in overheated economies and, following an extended period of large capital inflow, the probability of a banking crisis is now substantially higher.

“When debt levels are high, [fiscal reforms and austerity measures] as necessary as they may be, may not be enough,” explains Reinhart. “You need more tools to reduce such high levels of debt. One such…is explicit restructuring. I don’t think we have seen the last of [debt] restructuring in Europe, and I don’t mean just Greece.” Financial repression—a combination of more regulated financial markets and persistent low interest rates that result in negative real inflation adjusted interest rates—may also need to be part of the discussion to overcome the current situation globally. Whatever the method, some party must bear the cost, says Professor of Economics, Jeff Borland. “The key difference between the methods is who bears the cost,” says Borland. “For example, fiscal adjustment and austerity imposes the costs on the citizens of the country in debt; whereas restructuring of default imposes the costs on the citizens of other countries who are owed the money. This is why working out how to achieve debt reduction is so fraught—everyone wants someone else to pay.”

“A major stylised fact about the GFC is that developing countries avoided the worst effects,” says Borland. “Declining commodity prices, global investors turning back to equity markets in advanced economies, and a rising dollar increasing the burden on their dollar denominated debts, make for a less rosy future.” Many fear a repeat of the 2013 ‘Taper Tantrum’ and Reinhart suggests there are missing ingredients that we’re not seeing in the global financial system as regards emerging markets’ finance sources. China’s economic slowdown is, and will continue to have, direct and indirect effects on the world economy. In particular, a decline in Chinese financing of emerging markets represents a new area of risk that has not been widely considered. The proportion of emerging markets with significant current account deficits has risen markedly and history suggests this is an important indicator of future banking and economic problems. According to Reinhart, an era of greater emerging market turbulence lies ahead. David Finch was an alumnus of the University of Melbourne, graduating with joint honours degrees in commerce and arts in 1944 and received his PhD from the London School of Economics. He was appointed to the newly established International Monetary Fund (IMF), where he held the position of Councillor and Director of the Exchange and Trade section of the IMF. He was awarded an Honorary Doctor of Commerce by the University of Melbourne, two years before his death, in 2000.

With a growing population, projected to top 36 million by 2050, and one of the most expensive property markets in the world, is Australia in the midst of a housing affordability crisis? According to the senate committee report, A good house is hard to find: Housing affordability in Australia, the cost of an average home is now equivalent to seven years of average earnings, up from three years in the early 1980s. With prices rising, many would-be first time buyers are priced out of the market, stimulating growth in the rental market, and fuelling concerns about international investment, tax concessions, urban sprawl and household stress. As gross income took a nosedive in 2009, house prices spiralled to unprecedented highs in all Australian capital cities. House prices have continued to rise faster than income since 2013, and according to data from the Melbourne Institute, the difference is expected to increase further in the short term. The number of households with a mortgage has increased substantially over the last 20 years and this is mirrored by significant growth in the rental market with one in four households now renting. Increased supply of quality housing is required to accommodate Australiaâ&#x20AC;&#x2122;s growing population but this must be paralleled by growth in infrastructure and amenities to service these developments. While more affordable housing may alleviate pressure for some, a sudden drop in house prices could put some existing homeowners in negative equity, leading to rising bad debt and undermining bank share prices. With house prices continuing to surpass income, housing demand showing no signs of abating and Australians as eager as ever to own their own homes, we asked the experts their thoughts on the future of housing in Australia.

House prices have continued to rise faster than income since 2013, and according to data from Melbourne Institute, the difference is expected to increase further in the short term.

The Plannerâ&#x20AC;&#x201D;liveable cities

The Economistâ&#x20AC;&#x201D;supply and demand According to economist and tax expert, John Freebairn, the current property market situation is a case of basic supply and demand, where demand outruns supply so prices rise. Demand for housing is price sensitive and shifts out with population and income growth. For households the cost of housing reflects the purchase price, as well as the availability and cost of finance, and other expenses such as repairs, maintenance and rates. Much of the increase in demand for housing in Australia in recent years can be attributed to population growth (both natural increase and net migration) and to the lower cost of finance. The supply of housing takes time to respond to an increase in demand. Often there are lags of several years to gain approval for new housing, to obtain finance, for the associated provision of infrastructure, and construction time. If there is an unanticipated jump in housing demand, with new housing supply restricted, most of the demand increase flows into higher prices. Only after some years to allow for supply to respond will the rate of price increase slow or fall. The current tax system favours savings invested in owner occupied homes and, to a lesser extent, rental property, as well as the exemption of owner occupied homes from the age pension means test. Such tax incentives also increase the demand for housing.

Not only will we need more than a million new homes in both Sydney and Melbourne in the next 35 years, says urban planner, Professor Carolyn Whitzman, but we will also need infrastructure to support them. Professor Whitzman, who has been instrumental in guiding liveability policy globally, argues that we canâ&#x20AC;&#x2122;t talk about the property market without considering public transport, childcare centres and schools, and health services and aged care, which are also key drivers of demand. Australian cities need long term metropolitan strategies that link public infrastructure investment to the growth of new homes, and provide sufficient certainty to both private developers and local residents. Internationally many cities face similar housing affordability issues and Whitzman says that Australia could learn a lot from Vancouver, Canada, and Portland, US. Significantly, metropolitan planning in these cities is based on local governments working together on a common vision and outlasts both state and local government election cycles. Whitzman is leading a collaborative research project, Transforming Housing: Affordable Housing for All, to address social justice, economic resilience, and environmental sustainability challenges facing Melbourne and Australia. Forging strategic industry partnerships and drawing on international best practice, the research project is piloting and evaluating innovative policies and programs to expand the amount and quality of affordable housing in Australia.

HOUSE PRICES OUTPACING INCOME GROWTH Property market in focus

Niamh Cremins

The Finance Expert—complex incentives Professor Garry Twite says that foreign investment and negative gearing have become the big issues in property market discussions but we don’t fully understand the nuances surrounding these concepts and their implications. Foreign investment in the Australian property market may be high but we need to determine the breakdown between foreign investment and investment fuelled by immigration. Referencing research from the University of Oxford, Professor Twite says that it is likely that some foreign investment, particularly in more suburban areas, actually takes the form of people moving to Australia to live and while they are taxed as foreign investors their goal is to become Australian citizens. The Oxford study investigated foreign capital flight into residential real estate in London and found that changes in the domestic political environment of the origin country led to a spike in house prices in the corresponding London suburb.

The Designer—the future of prefabrication Associate Professor in Environmental Design, Assoc Prof Masa Noguchi agrees that Australia needs to look overseas for guidance in dealing with the current market situation. Noguchi says Australia is way behind Europe, North America and Asia in sustainable, cost efficient prefabricated building delivery. If we look at the property bubble as innovators, we can view it as an opportunity for the exponential growth of housing performance that embraces the needs of individuals and society. The Australian construction industry is a $150 billion sector, beset with rising costs and inefficient productivity associated with many traditional building methods, yet only 3% contributes to prefab production today. In contrast, 15% of housing starts are considered to be prefabs in Japan and in Sweden prefabrication exceeds industrialised housing delivery with about 70% of the market share. Japanese housing manufacturers mass-produce net zero-energy-cost, yet customisable, homes, designed to accommodate diverse market needs and demands, and in Canada we have seen sustainable housing delivery through the EQuilibrium Initiative that leveraged the successful commercialisation of prefabricated net zero-energy houses in the local contexts.

The question of negative gearing is even more complex and the real implications of any policy change are highly dependent on multiple factors, such as demand, availability, income, etc. Australia removed negative gearing in the mid-1980s and real rents and house prices didn’t change to any large degree. In the US there is a long history of gentrification, where investors create a large property portfolio in a particular area and act as real estate agents. This model became particularly pertinent with the advent of the Global Financial Crisis. We saw a large stock of foreclosed property. Financial institutions became big buyers and many set up a management model that will have a large presence in the market for some time to come. This model could easily be replicated in Australia.

This is a golden opportunity for Australian prefabrication. The recently established training centre for Advanced Manufacturing of Prefabricated Housing at the University of Melbourne will support research and development to propel the prefabricated housing sector well beyond the current 3% share of the construction market, says Assoc Prof Prakash Singh. Assoc Prof Singh will lead a research team on supply chain and financing innovation at the centre and Assoc Prof Noguchi will contribute to the zero-energy mass custom home design and construction research and development.

To move forward we need to be very clear on what we are trying to achieve and what the widespread implications of our actions will be for all the players in the housing market.

The Property Expertâ&#x20AC;&#x201D;buyer behaviour Senior Property and Finance Advisor, Jason Kuan, of Provincial Home Loans and Provincial Property Advocacy, says the consumer needs to take back the power. Emotions can run hot when buying a property to live in. Buyers will spend more for the characteristics they see as most desirable, such as location, proximity to amenities, commute time to work, family or space, as well as presentation and style. Such sentiment can fuel bidding wars as buyers commonly seek the same thing. Although buying power is primarily determined by our capacity to pay more than our competitors, understanding why we should or should not is a skill. As the heated market continues, lenders are under increased pressure from the Australian Prudential Regulatory Authority, with changes in lending criteria starting to filter through to the buyer, in the form of lower LVR (loan-value ratio), and lower rate discounts for investment property lending, as well as greater income capacity requirements to borrow. However, Kuan argues that an educated and realistic property buyer is a powerful investor even in current markets. Potential buyers can take control of the current situation if they are prepared to prioritise certain housing characteristics to meet their needs without causing undue financial or emotional stress. Property investment is still one of the best ways to achieve long term capital growth.

The property market is complex and Australia faces both challenges and opportunities. The future of housing in Australia requires expert collaboration that crosses academic and industry boundaries to find long term, sustainable solutions.

ASIA’S ECONOMIC POWERHOUSE

THE FAMILY BUSINESS

Professor Howard Dick

Anywhere in the world, small and family business predominates, at least numerically. For all their limitations, families have always been the most reliable basis for pooling and managing capital in societies where property rights are insecure and/or bank finance difficult to secure. Only within the last 100 years have limited liability public companies taken over the commanding heights of Westernised economies. What distinguishes business in Asia is, therefore, not the continuing preponderance of family business in trade and services, but its prominence at the commanding heights. On Asian stock exchanges, most listed companies are still controlled by families and associates with public shareholdings as minority equity. The notable exceptions are state-owned enterprises and multinationals. Large family business groups are household names in their own countries and some have extended their footprint internationally. Hong Kong-based Sir Li Ka-shing controls two multinational groups, Cheung Kong (property, infrastructure) and Hutchison Whampoa (ports, telecommunications), both active in Australia. Indonesia’s Salim

Group is best known through its Indofood division as the maker of ‘Indomie’ instant noodles. The Wijaya family’s Sinar Mas group, like the Kuok family’s Wilmar Group, has massive palm oil and agribusiness interests, plus the big affiliate Asia Pulp & Paper. The principal of Indonesia’s Lippo Group (property, telecommunications, media), James Riady, is a Melbourne alumnus and Faculty donor. The puzzle for Western business theorists has been why in Asia—and also in Southern Europe or Latin America—family business has been sustainable on a large scale across so many industries. One obvious feature is the conglomerate form of business. Whereas Western corporations are advised to focus on their core business, Asian family businesses usually diversify, thereby spreading risk. As with the emergence of the zaibatsu during the early industrialisation of Japan, or the chaebol in postwar Korea, this often reflects the scarcity of risk capital and entrepreneurship. The leverage of established political connections is another factor, highlighted by the role of the ‘princelings’ in Chinese big business. One sector where family business does not work so well is banking. While owning a bank has always been a temptation and a mark of status for gung-ho entrepreneurs,

long experience has shown that the combination of family ownership and related lending leads to high risk and instability. This problem has plagued European and American banks. It showed up in Asia in the late 1990s with the Asian Financial Crisis and widespread bank failures. In Indonesia, Thailand and Korea, there are now formal limits on bloc holdings and related-party loans. In most fundamentals, including strategy and operations, family business is not much different from any other business. Quite simply, business is business. There is no need for a separate theory and curriculum of ‘Family Business’, no need for a Master of Family Business. For consumers buying brands, it makes little difference whether the producer is a family business or not. Nor is there any distinction by law. The most distinctive feature of family business is actually a sociological one, relating to human resources and succession. Small family businesses can rely on family members for management and other key roles such as book-keepers and storemen; if not brothers and sons, then in-laws or cousins. In pre-WWII Chinese business, multiple wives and concubines allowed plenty of choice, though often at the cost of rivalry and factionalisation. The greatest point of weakness for family firms is succession. Despite some notable exceptions, there is much truth in the adage that family business does not survive more than three generations. Sons are not always

as driven, capable or ruthless as their fathers. Moreover, in the second generation there are challenges of rationalisation and consolidation that call for different skills. An ageing patriarch who insists on making final decisions can lead to turmoil, as can competition between brothers or other family members over vision and strategy. That said, many family businesses in Asia have made a successful transition between generations with sons—and sometimes also daughters—sent overseas for university education, returning to learn the business and apply modern practices of management. This second generation has, in turn, usually been more relaxed about bringing in nonfamily managers and technical people to build capabilities and boost innovation. Such expertise has been vital in helping Asian businesses to launch themselves into regional and international markets, the phenomenon of ‘emerging country multinationals’. In this way, it becomes possible for the founding family to retreat from hands-on management and as shareholders to guide the firm through the board of directors. Something similar was seen early last century with the ‘robber barons’ of America, the Morgans, Carnegies, Rockefellers, and eventually also Ford. A similar trend showed up in pre-WWII Japan and can be expected to appear elsewhere in decolonised and industrialising Asia. Stock exchange listing of public companies and the hiring of nonfamily professional managers are already strategic moves in this direction. The good news for Melbourne graduates is that large family companies in Asia will offer internal career paths, even if loyalty to the family will be as important to promotion as competence—and not only for graduates of Asian background. Just as in the 1960s Australian graduates were hired by British and American multinationals, increasingly they will now find jobs with Asian multinationals. Due diligence for graduates will involve studying the family and its reputation, as well as the company itself. If they are smart and looking to progress, they will also learn a relevant Asian language and seek to become a trusted insider, not just a local hire.

Many family businesses in Asia have made a successful transition between generations with sons—and sometimes also daughters—sent overseas for university education, returning to learn the business and apply modern practices of management.

THE BREAD AND BUTTER

Tessa Shaw

For some, referring to the family’s bread and butter is merely a turn of phrase, but for Faculty of Business and Economics (FBE) alumna Wendy Yap, the meaning is literal. Taking the helm of her family’s US based real estate business at the tender age of 20, she met the challenge head on, fully aware that her lineage did not equate to guaranteed success. This persistence for continued innovation and drive, combined with practical experience and formal education, has underpinned the powerful businesswoman’s enduring success. Rising to the economic challenges of the nineties and the needs of the nation, Yap went on to create a household name in Sari Roti—PT Nippon Indosari Corpindo Tbk (sariroti.com)—now the largest massmarket producer of Japanese-style breads in Asia, excluding Japan.

Joo Chiat Road (Singapore), Stanley Street (Hong Kong), Jalan Alor (Kuala Lumpur); a short stroll down any of these streets means you would have walked past a dozen familyowned-and-run businesses. Professor Dean Xu from the Department of Management and Marketing, FBE, tells me that casual empiricism suggests that the majority of firms in the world are family businesses, and the percentage should be higher in Asia than the world average. Many don’t generate millions in profits—not even hundreds of thousands—but there are some that do. So, what have the giants of the industry done to stand head and shoulders above the rest? How have modern management practices brought these companies into the business spotlight? Professor Xu underscores the need for education in the current climate, and is excited about what education means for the future of business in Asia, where many of the firstgeneration entrepreneurs acquired business acumen from practical applications rather than through education and theory-based learning. By contrast, many of their children now have degrees in Business and Management. “They will be a new generation of business leaders that are very different from their parents,” says Xu. Named one of the most powerful businesswomen in Asia by Forbes, Wendy Yap (BCom 1976), President and Chief Executive Officer of PT Nippon Indosari Corpindo Tbk (Sari Roti) is one such business leader changing the face of Asian family business. “Although my father was my role model in business, I was able to use the knowledge acquired from my undergraduate studies in the Faculty of Business and Economics,” Yap recalls fondly. “This knowledge later became a strong foundation for problem-solving, and decision-making in developing and growing the family business.” In Indonesia, Sari Roti produces over 4.2 million pieces of bread daily in their 10 factories, with 56,000 points of sale. This equates to a 90% market share of the mass-produced bread industry in Indonesia. Since production began in 1997, the company has enjoyed healthy growth, not only surviving, but expanding during the Asian financial crisis of the late 1990s. The company has been publicly listed since 2010, and continues to grow at an annual rate of about 30% in sales.

THAT FEEDS A NATION Sari Roti evolved from Bogasari—the world’s largest single-location flourmill, co-founded by Yap’s father, Piet Yap—in the early 1990s, to become a household name in Indonesia. With the Asian financial crisis of 1998, demonstrations were rife, and supermarkets were unable to stock their shelves with consistent food supplies. People needed something they could eat on the run, as well as a product that was hygienic and had a healthy shelf life. Sari Roti’s soft, Japanesestyle bread products became a winner. Resolute commitment to the food manufacturing process to meet consumer needs has been vital to the company’s early and continued success. Sari Roti ensures that all their products are vacuum-sealed and handled with minimal human contact, allowing them to last for up to five days in their plastic sleeves. Yap’s eagerness to adopt new technology has been crucial in helping the company expand rapidly. Meeting demands for bread for 250 million people is no mean feat and using automated systems very quickly became de rigeuer.

Yap believes in sound corporate governance and cultivating a culture of teamwork and workplace loyalty. “I have always had a very good team and they have been very loyal, so we have had little labour turnovers in management. I practice good corporate governance and everything has to be very transparent. “As the organisation gets bigger, it’s important to maintain open communication channels and to keep everyone in the loop. However, with email, the internet, mobile phones, and new communication technologies, it is easier to communicate with managers in remote regions. “I tell my staff that we need to have teamwork because it allows us to have better control and implement our strategies and policies across the entire organisation more effectively.” To help cultivate this important team work environment, Yap ensures the entire team celebrates record sales achievements, to reward their role in the process, and to inspire everyone to look forward to the next challenge as a single team with a common purpose.

“Growth strategy is something I’m constantly thinking about,” says Yap. She also highlights the importance of aligning growth with quality control, particularly in manufacturing processes. “[It is] important to find skilled labour to ensure the automation process works.”

INDONESIA’S RESOURCES BOOM:

CURSE OR BLESSING? Professor Ross Garnaut

In the eight years after 2003, global prices, in real terms, for most energy and metals commodities and for some agricultural commodities, rose to their highest levels ever. Indonesian exports in inflation-adjusted US dollars more than quadrupled in value between 2003 and 2011 and the share of commodities in total exports rose from 52% to 68%. Indonesian average incomes grew strongly for a while, without a sustained focus on policies supporting economic growth. Indonesia’s resources boom fuelled growth in average incomes, after a difficult climb out of the 1997–98 Asian financial crisis. It also encouraged the emergence of economic structures and policies (and features of the new democracy’s political culture) that made sustainable and equitable growth more difficult. With the resources boom having retreated since 2011, Indonesia faces major challenges. The boom was caused by exceptionally strong resource-intensive growth in China. It continued, with only a brief interruption during the 2008 Global Financial Crisis, until 2011, when Chinese economic development began to show the influence of a new model of economic growth.

Resources, principally petroleum, had been the mainstay of early export growth under Soeharto’s New Order government, from 1966. Enough oil revenue was used for public purposes to support broad-based development through the public provision of education, health, agricultural services and income support, and through the subsidised provision of agricultural inputs. This all changed with the collapse of global oil prices in the mid-1980s. After the withdrawal of opportunities for economic growth based mainly on petroleum exports, Indonesia embarked successfully on reform to promote internationally oriented industrialisation of the kind that had underpinned development elsewhere in East Asia. For more than a decade, Indonesia’s industrialisation supported sustained growth in economic output of 6–7% per year and higher. The benefits were widely distributed through the growth in demand for labour and the associated increases in employment and wages, supported by considerable public expenditure directed at improving rural services. The political and economic foundations of this rapid, broad-based growth were destroyed by the 1997–98 Asian financial crisis. It was a great achievement of President Susilo Bambang Yudhoyono in his first term (2004–9) to demonstrate that it was possible to use economic policy to secure stable growth in democratic Indonesia. Then the global resources boom offered new opportunities for resource-intensive growth. The challenges facing Indonesia now, after the resources boom, are in important ways similar to those that followed the fall in petroleum prices in the mid-1980s: for one, the boom encouraged economic interventions that damaged efficiency in resource allocation and prospects for long term growth. So was the boom a blessing or a curse, or both? Indonesia now has the opportunity to enter a new era of broad-based development, but only by implementing far-reaching reform. The international environment after the resources boom should be conducive to the macroeconomic adjustment that Indonesia has to make if it is to maintain growth without risking an external financial crisis. The end of China’s resources boom and the shift towards the normalisation of US monetary policy are helpful to exchangerate depreciation. The new pattern of growth in China offers expanded opportunities for exports of manufactures, high-value foodstuffs, and services. The dramatic fall in global oil and gas prices from mid-2014 has provided a congenial environment for the removal of energy subsidies, providing fiscal room for a large expansion of public expenditure on productivity-raising infrastructure and other public goods. The markedly lower international real interest rates on sovereign debt since 2000,

With the resources boom having retreated since 2011, Indonesia faces major challenges.

and especially since the 2008 crisis, offer strong support for a government committed to increased expenditure on infrastructure. Chinaâ&#x20AC;&#x2122;s intentions to increase its funding of infrastructure in developing countries are reflected by its commitment to fund the Asian Infrastructure Investment Bank. Substantial depreciation of the real exchange rate is required. Reform to accelerate productivity growth can assist real depreciation, but policy reform and reflection of reform in higher productivity take time. Firmer budgets and correspondingly easier monetary policy, supported by domestic cost and income restraint, are therefore the main supports for early depreciation of the exchange rate. Maintaining reasonably strong productivity growth as a foundation for higher growth in the future requires the unwinding of distortions in the operation of markets. It also requires reform of the political system that shapes economic regulation and policy.

BEING SOCIAL ON SOCIAL MEDIA

The world is a connected place, and most people are connected to their social groups online. The internet has evolved into a tool that creates and manages social connections and community. If someone has some information that they think has value, they’ll share it through their digital networks. How many people would wait before they next saw their friends to tell them in person all about this wonderful meal they had for brunch at the weekend? Think about Instagram, Snapchat, Twitter and/ or Facebook and photos of perfect-looking plates of ricotta hotcakes decorated with flowers, often snapped, shared and tagged with the handles of everyone present at the table, even before the dish has been tasted. So why do we do this? And when don’t we do this? The average Facebook user has 338 Facebook friends. By contrast, the average person has a series of friends in numbers:

When will your next post go viral—or will it never? Dr Brent Coker

150 casual friends (people you’d invite t o a large party)

15 intimate friends (people you’d confide in about most things)

50 close friends (people you’d invite t o a group dinner) 5 best friends (often family members, too; your close s upport group)

In fact, another study claims that we only truly have two confidantes. Knowing these numbers, plus the fact that social media networks make the sharing of information very easy, means that anything anybody shares online is likely to be seen by many more people than would generally occur offline. News travels fast, and it travels faster online; something that has value can go viral extremely quickly if people see a reason to share it.

When we share something online, it could be out of genuine interest in spreading general knowledge, in entertaining our friends, or in better educating the world around us. Biologically speaking, we are hard-wired to exist in groups, and learn group customs and social hierarchies. We need to feel a sense of belonging, and learn methods of communication that provide group survival, status and accentuated group harmony. The way to move up in a group’s social hierarchy is by ‘earning’ it, that is, to earn social currency, which is often that sub-conscious reason for sharing content online. Social currency is a kind of value that people earn from interacting and being social with others. Like many primates, humans have a strong desire to earn respect and admiration from others. One way we earn social currency is by contributing in a positive way to a group. Shared interests are one of the forces that bind a group together. Social currency acts as a powerful motivator for people to share information with others—a humorous image, an idea, or a movie.

Sometime back, Cheryl, the director of an advertising agency, rang asking for my help. A particular online advertisement for a new brand of underwear wasn’t going viral as they had hoped. The ad was a personalised story type advertisement, a technique that first asks the viewer to upload a photo of themself and is eventually included in the story. (The aim is to surprise the viewer who isn’t expecting to become part of the story.) I uploaded a photo of myself, selected male for my gender, and sat back and watched. The movie began with a pan of a half-lit, retrofitted studio apartment. The camera focused, and a woman appeared from the shadows of the apartment wearing lingerie. She glided past a coffee table, pausing to pick up a magazine, and headed towards her bed. She lay on the bed and opened the magazine, flipping through a few pages before pausing on one with intent. The camera zoomed in on the page to show a muscular, tanned male posing in a G-string. The camera zoomed in further to reveal the face—it was me! Then things got steamy—as the women stared at the picture she began to caress herself, and... I flashed back to my phone conversation with Cheryl, and felt uncomfortable. It was obvious to me why the ad hadn’t gone viral. The problem wasn’t the quality of the production—clearly a lot of effort and expense had gone into it. Where it had gone wrong was that it assumed that sex sells. Or more precisely, that showing provocative content makes people want to share. The reason why Cheryl’s advertisement hadn’t gone viral was because there was no reason to share. In fact, it actually contained a disincentive to share. Most people would feel quite awkward sharing something sexually explicit in their social networks. I suspect many people would be worried about signalling to others something twisted about their personality. It created a reason to not share. You see, people share things online not just because it’s interesting, but also because they have an instinctual desire to signal to others something about who they are.

I t was obvious to me why the ad hadn’t gone viral. The problem wasn’t the quality of the production—clearly a lot of effort and expense had gone into it. Where it had gone wrong was that it assumed that sex sells.

NETWORKING GLOBALLY Tessa Shaw

Many of us will have started taking first steps towards networking while at university, through social clubs and classroom projects. Often, these friendships endure and we find ourselves catching up with an old university mate at the odd social or business function. Whether you are just starting out in your career, or are a veteran in your industry, networking can provide perspective and a sense of support that can benefit your personal and professional life. We don’t always think of the alumni network when the topic of ‘networking’ comes up, but it is alive and thriving, and has proven to be a rich source of opportunity and connection for many of our graduates. Charles Custeau – pictured below right – is a young graduate (BCom 2011) currently based in Boston, working in private equity after a successful stint at Macquarie Capital in New York City. Moving away from friends and family was a career choice—the hedge fund and private equity industry in New York is by far the largest in the world, and when he was headhunted, he took the chance. Alone in the Big Apple, Custeau quickly got in touch with other Faculty of Business and Economics (FBE) alumni, now close friends of his. “We are always making an effort to get in touch and are almost a second family to each other,” he tells me. Apart from the social aspect, Custeau adds, “You need to know people in the same industry that you can trust and have a relationship with so that you are exposed to a broader perspective of what is happening at other firms. I’ve experienced this first hand.” Other times, the relationships are coincidental. In 1988, as BCom alumna Lay Keng Tan approached graduation, she was offered a position with Arthur Andersen in her hometown of Kuala Lumpur. One of her early bosses, Chris Butler (BCom1978, LLB 1979), also an alumnus of the Faculty.

Having the common ground allowed their professional relationship to develop quickly. “Quite a few of the team had studied in Australia and I quickly established that Lay Keng had been at the University of Melbourne like me,” Butler recalls. At Arthur Andersen, Tan also met another alumna, Gloria Goh (BCom Hons 1982), who introduced her to the newly formed Malaysia Alumni Association, which Tan has greatly contributed to and supported over the years. “Lay Keng really has been involved in the alumni effort from the ground floor,” says Butler. And even though she now runs one of the most successful human capital practices in Southeast Asia, Tan and Butler are still in touch, and Goh has become like a sister to her. Certainly, alumni connections assist in navigating a new city or country, establishing you quickly in a new community and propelling you to new opportunities. For Hong Kong-based Kenneth Lau (BCom 2009), networking has not only provided a social circle for him to be a part of upon returning after six years away, it has also broadened his career outlook. The native Cantonese-speaker explains, “Regular exposure to like-minded Melbourne alumni in Hong Kong helps me keep an Asia-Pacific outlook, develop important people skills and maintain my English fluency; all contributing to my success with my current employer, a global electronic brokerage company, Interactive Brokers, servicing mainly institutional clients, many of whom work out of Australia.” Kenneth is now President of the Hong Kong alumni association. Kyle Sutcliffe (BCom 2015) – pictured below left – an investment banker with J.P. Morgan in New York, is one of the alumni Custeau regularly catches up with. He agrees that networking is vital to professional advancement. “It’s been exactly a year to the day since my arrival in New York,” Sutcliffe tells me over the phone. “Time flies! I was really looking forward to the move. The added bonus on top of the awaiting opportunities is knowing that there have been Melburnians before me who have gone on to reach the top of their field in one of the most competitive environments in the world. It creates a sense of excitement, is extremely encouraging but above all else really inspiring.”

YES! I WANT TO SUPPORT: The Deans’ Fund for Student Experience He is thankful that being part of the alumni network has made it easier for him to get help, from career guidance to life decisions such as whether to stay on in New York or return home. “Some of them, like Charlie [Custeau], are only three months ahead in developing their sense of place, while others, like Jennifer Nason [Global Chairman of Investment Banking at J.P. Morgan and also an FBE graduate – BA 1980, BCom Hons 1985], have decades of experience to share with me,” Sutcliffe explains. “There is such a big emphasis on university in America, and the relationships that come out of it. Lacking this on a similar level can be tough at first. It takes time to develop new relationships—and being overseas we don’t always have the relationships that others enjoy. That’s why having this alumni network is so great, and I’m really grateful to be part of it. It’s one of the major benefits of having studied at the University of Melbourne and something I will always be extremely grateful for.” Anywhere in the world your career might take you, you will find an FBE alumnus. From Sydney to Singapore, Jakarta to Shanghai, or London to San Francisco, FBE hosts regular receptions, Dean’s dinners and networking events. The Business and Economics Alumni Relations Office can assist so it’s important that we have your current address. Contact us on: fbe-alumni@unimelb.edu.au

First in the Family Scholarships Entrepreneurship and Innovation Research at the Faculty of Business and Economics

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FOUNDATION DINNER

MELBOURNE’S BUSINESS LEADERS RAISE $500,000 FOR ENTREPRENEURSHIP Vincent Ramos

Alumni, friends, and strong community and industry partnerships play essential roles in helping us shape tomorrow’s leaders and contribute to the social and economic fabric of Australia and the region. The fifth Annual Dinner of the Melbourne Foundation for Business and Economics saw a record number of influential business leaders gather in the Great Hall at the National Gallery of Victoria to celebrate the connections between the Faculty and the business community, the impact of philanthropy, and the achievements of alumni.

Mr James Gorman, Chairman and Chief Executive Officer of Morgan Stanley, who graduated from the University of Melbourne with a Bachelor of Arts (BA) and Bachelor of Laws (LLB), delivered a keynote address focused on effective management and his journey from Melbourne schoolboy to Wall Street executive. Guests also heard from graduate student Richard Homewood (BA 2012, MIntBus 2014), who provided insights from his first taste of entrepreneurship in a small Kenyan town and from his latest startup, SafeDrive, an app that rewards drivers for not touching their mobile phones as they drive.

Celebrating outstanding achievements

Chair of the Foundation Mr Tony Burgess (BCom 1980) took the opportunity to raise the need for entrepreneurship in Australia. As globalisation and technology continue to transform the economy, it will be vital in the years to come to nurture a culture of business creation to sustain employment, innovation and growth for the future. “To provide the next generation of job opportunities in Australia and to underpin our continued prosperity, we need to build on our strengths to create new businesses,” said Mr Burgess at the event. He announced the new Master of Entrepreneurship to be offered in partnership with Ormond College and other University faculties from 2016. To support this important addition to the business and economics curriculum, proceeds from the Foundation Dinner will be put towards advancing the growing ecosystem of innovation and entrepreneurship at the University of Melbourne, including a Chair in Entrepreneurship. “Philanthropic support increases our capacity to attract talented staff and students, and conduct programs that make vital contributions to education, knowledge and society,” said Mr Burgess.

Alumni of Distinction included Outstanding Achievement Award recipient Michael Andrew (BCom 1972 LLB 1978), Leadership Award recipient Yasmin Allen (BA Hons 1982 MA 1985), Outstanding Contribution to Faculty and University Award winner Professor Jeff Borland (BA Hons 1982 MA 1985), and Rising Star Award recipient Jeremy Burke (BCom 2003). Allen received further accolade shortly after the Foundation Dinner, being named Australia’s eighth most influential nonexecutive board director in BOSS magazine. Hear more from the 2015 Alumni of Distinction: youtube.com/MelbourneFBE

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The Faculty of Business and Economics (FBE) at the University of Melbourne is a world leading centre for teaching and research across the disciplines of accounting, actuarial studies, business administration, economics, finance, management, and marketing. The vibrant community of undergraduate, graduate and research higher degree programs, housed at the Faculty, present an ideal environment for learning, networking and practical skills development to equip students for the realities of the business world. The Bachelor of Commerce (bcom.unimelb.edu.au) is the most highly sought-after program of its kind in Australia, producing market ready graduates. It is also an ideal pathway to further study through the Facultyâ&#x20AC;&#x2122;s graduate school, Melbourne Business School (MBS). With a portfolio that caters for new graduates, early career professionals and those taking the next step to lead organisations, MBS (mbs.unimelb.edu.au) is helping business professionals globally to enhance and evolve their careers. Home to some of Australiaâ&#x20AC;&#x2122;s leading research institutes and centres, FBE has a strong tradition of powering economic and social insight to advance policy and practice. Our academic community is dynamic, interdisciplinary and international in focus, creating a strong research culture. For more on graduate research degrees visit: fbe.unimelb.edu.au/phd

Authorised by: Deans, Faculty of Business and Economics, CRICOS Provider code: 00116. Intellectual Property: For further information refer to Statutes and Regulations. Copyright: The University of Melbourne 2015. Disclaimer: The information in this publication was correct at the time of printing. The University of Melbourne reserves the right to make changes as appropriate. As details may change, you are encouraged to visit the Universityâ&#x20AC;&#x2122;s website or contact The University of Melbourne Information Centre to obtain the latest information. Opinions published are not necessarily those of the publishers, printers or editors.

Editor: Niamh Cremins Sub-editors: Tessa Shaw and Rebecca Gleeson Designers: Qualia Creative Photography: Wei Wei Chong, Tessa Shaw, B.A. Van Sise @exchangemagazine