Change bankruptcy laws to help innovators, says billionaire

Image: The Australian

Australian billionaire Jack Cowin has urged the Turnbull government to consider US Chapter 11-style bankruptcy laws to aid local entrepreneurialism.

The Herald Sun reports that Cowin – who is executive chairman of Competitive Foods Australia and owns a 26 per cent stake in Domino’s Pizza Enterprises – suggested such a reform to help change attitudes around risk.

“If you look at the impact of someone going into business in Australia (then failing), here it affects your wife, your kids,” The Herald Sun reports him as saying.

“In the US people probably take more risk due to their bankruptcy laws.

Changes to bankruptcy laws were proposed by some, such as current Innovation Australia head Bill Ferris, in the lead up to December’s National Innovation and Science Agenda release. These were not adopted.

 

2 thoughts on “Change bankruptcy laws to help innovators, says billionaire

  1. I am only small scale and can tell you 15 years back, a 1.5 years of admin was hell and finished my marriage, I survived but have never been the same.

    This country is backward in so many ways.

    If I had gone bankrupt I hate to think how devastating that would have been.

    Why create export if it harms home. Too many backward people in government who dont understand business, listening to too many pathetic globalists.

    Look at the last 24 years and all our growth, and look at the growth in total debt, house price growth ( so we will create an underclass).

    One of my business Friends went out the door in 2009, and it took his late teen children 3 years to talk to him again, of course his marriage evaporated

    Government here at all levels has no respect for SME’s, we should have got together last year and formed an SME party.

    Thye want us to innovate and risk all and give us little rights and treat us like dirt.

  2. It requires a lot more than just a change to one aspect of business and taxation law to move toward what the USA have. And there is a down side. More bankruptcies means more capital lost. And we already have a dearth of capital.

    In Canada for instance, you can claim back your last 5 years of PAYG equivalent tax as cash to get your startup off the ground. With Australia having low access to finance for startups this could be a good measure to encourage those who have business ideas getting them started and reducing bootstrapping stress. At present, startup funding and venture capital in Australia totals less than the amount bet on the Melbourne Cup.

    Bankruptcy laws can lead to a startup culture of throwing mud at the wall and seeing what sticks – with failure rates higher than 90%. Currently we are running at 50% with most of those being shut down rather than going bankrupt. So we want to balance reduced financial risk with not dramatically increasing the startup failure rate. It should go toward improving the likelihood of success.

    Lean digital startups currently have the highest failure rate. But the lean part at least minimises the loss. So there is a lot of merit in fail fast, learn and correct, get close to the end customer styles of startups.

    And we also should look at the othetr areas of structural weakness in our business cultures:
    – lowest rate of collaboration in the OECD
    – lowest rate of publicly funded research commercialisation in the OECD
    – lowest rate of academia to industry engagement in the OECD
    – low management competence on average
    – ranked 106th in the world for commercialisation yet a very healthy 3rd for problem solving

    So I am in favour of a package of measures that increase the rate of startups as well as improving their success rate. Risk and reward balancing needs to happen and at present in Australia the balance is too far in the risk direction.

    As having successfully gotten my own company off the ground and now running strongly, it takes time and is frustratingly slow when you are bootstrapping. But the incentives need to be balanced so they drive the behaviour we want to encourage. Working out exactly what that looks like is never easy. Success is only ever obvious after the event. Check out this video of Steve Jobs pitching the iPad to the UK Dragon’s Den https://www.youtube.com/watch?v=QKsPLPZPkEI

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