Economist Nicholas Gruen's strategies for new ways to work

Lateral economics CEO Nicholas Gruen

Nicholas Gruen finds and develops strategies for new ways to work (don’t call them innovations) in government, business and the broader society.

You’d think Lateral Economics CEO Nicholas Gruen would be happy. The term “innovation”, for years a niche idea discussed by a few policy analysts, is suddenly everywhere. Politicians have adopted it en masse; big companies claim they’re all about it. 

Throughout his career in economics and public policy – including stints advising treasurer John Dawkins, and at the Productivity Commission and the Business Council of Australia – Gruen has brimmed with big ideas. Many of them have been strategies for driving innovation, for fostering dynamism, new thinking and new ways of producing goods and services in both the public and private sectors. 

In 2008, he was a member of the Rudd government’s Review of the National Innovation System. He participated in the 2010 Commonwealth Management Advisory Committee report on fostering innovation in the public sector. He chaired the Innovation Australia board in 2013 and 2014. He now chairs The Australian Centre for Social Innovation (TACSI).

So, surely he’s excited about the way everyone has now begun using the term “innovation”? Not really.

“I rarely use the word,” he says with a roll of his eyes.

“Innovation is a cliché,” says Gruen, “and I spend all my time trying to avoid clichés. There is a domain in which we talk about innovation, so I use the word in that sense, I guess – but I will rarely say ‘what we need is more innovation’. I try to be more specific in what I’m talking about.” 

"Money is really important until you’ve got enough of it, and then it’s pretty unimportant.”

Platitudes get in the way of the work that really needs to be done, he adds.

“They’re a loose way of talking. There are a lot of ways of innovating to make things worse and to screw everything up. Plenty of managers turn up and claim they’re innovating, but it’s just a smokescreen for someone who doesn’t really know what they’re doing.”

If you really want to be innovative, says Gruen, leave the clichés aside and get down to finding strategies that work.

A time for big ideas

Gruen grew up in a household of influential economic thinkers. His brother, David, runs the economics branch of the Department of the Prime Minister and Cabinet. His father, Fred, was one of Australia’s most influential economists, a professor at the Australian National University and economic adviser to former Australian prime minister Gough Whitlam. Fred played a key role in Whitlam’s decision to cut tariffs by 25 per cent in 1973. 

Gruen is himself an economist, and he too has been at the centre of policy formulation. As adviser to 1980s industry minister John Button, he was regarded as the ideas man behind the “Button car plan”, widely regarded as a breakthrough for cutting car tariffs, eliminating quotas and encouraging exports.

Gruen doesn’t want to call it innovative policy, but others have done so. He may have little patience for clichés, but he has plenty of thoughts on how policymakers can do things differently.

Information for everyone

When Gruen was invited to attend Australia’s 2020 Summit in 2008, he went armed with strategies for improving the long-term future of the country. One of them was a national information policy, which stems from his firm belief in the transformative potential of open data. 

Gruen believes information should be treated as a public good. He suggested to the summit that government provision of information could be reviewed and reinvigorated, just as competition had been in the 1990s.

He also proposed that open data could create a market for job satisfaction – companies collected information about employee satisfaction every year, so why not make it public? The proposal became known as “Windows on Workplaces”.

“It was about trying to encourage a standard on which you can report employee engagement data,” explains Gruen.

“That would mean a company would advertise their ratings as a way of saying ‘work for us because we’re the best employer in town’.” 

Taking this further, Gruen points to more important things than the pay packet. “Job satisfaction, especially for highly paid jobs, might be, say 60 to 70 per cent of what matters. It is for me,” he says. 

“My father brought me up to believe – and I still agree with him – that money is really important until you’ve got enough of it, and then it’s pretty unimportant.”

Gruen advocates for a market in what people actually want, rather than an “alienated, abstracted thing, which is money”. 

“I’m not suggesting money is not important, but as we get richer, it’s less important than these other things, and our discourse should reflect that.”

As Gruen sees it, most economists lack the imagination and courage to put such ideas into the foreground of public debate.

“They haven’t had the confidence to say these are the things we should focus on, in the way they did in the ’70s and ’80s, when they said money was so important,” he says. 

“Intellectual leadership in the mixed economy is almost non-existent. We simply have this debate of deregulation on the right and building up the social safety net on the left. It’s such a pity, because the economy is such a rich thing. Our lives are such rich things and simple ideas can help.”

Strategy for social change

In his role as chair of TACSI, Gruen is striving to turn simple ideas into practical solutions. TACSI partners with government, not-for-profits, philanthropy and business to make real progress toward changing the lives of people in need. 

Government spends billions of dollars each year on social services and reform, yet Gruen believes this has limited impact for the people it aims to assist, and he has ideas to bring about change. TACSI’s family-to-family mentoring project provides one example (see Family by Family, below).

“The way I see it is we have a number of large social expenditures that don’t really work,” he says. “They have been designed as if book learning is the most important thing.”

In Gruen’s opinion, many of our social systems have been designed around the interests of the professionals and bureaucrats who run them, rather than the putative beneficiaries.

“That is very easy to misunderstand as a sort of right-wing attack on the elites – and I half mean that – but I also know that these people are actually trying to do a good job,” he says.

“They preside over systems … that could be so much better, and [they] routinely don’t really pay attention to the interests and the perspectives of the people they are supposed to be helping.”

TACSI is built on the belief that people are the experts in their own lives. Gruen says the centre has started to understand how such an approach works and to “see the contours of a solution”. 

“I was a tragic liberal,” he says, “and now, because I actually feel there are things we can do, I feel much more ambitious about this.”

TACSI represents another direction in which Gruen can steer his transformative ideas. Clichés aside, they’re sure to be innovative.

Open data’s potential

In 2014, Nicholas Gruen wrote a report on the value of open data in Australia. It estimated open data could be worth A$16 billion a year, or around 1 per cent of GDP, over the next five years. 

“In other words, it’s much more growth-enhancing than tax reform,” he says.

Gruen laments that Australia has fallen behind countries like the UK in its approach to open data. 

“The UK is doing all sorts of tremendously good things,” he says. “Look at their personal information management services [PIMS].”

The UK PIMS agenda requires large firms to release their consumer data on demand to the consumer in a machine-readable format. “The consumer then controls the data,” says Gruen. “You could switch banks by just going to your control panel and saying ‘I want all that data that Westpac has got on me and I want to give it to ANZ’. That’s obviously hugely efficient.”

Family by Family

Family by Family, one of the flagship programs of The Australian Centre for Social Innovation (TACSI), aims to cut through bureaucracy to help fix social problems.

Despite the billions of dollars of social spending, TACSI says, incidents of family abuse and neglect have doubled over the past decade – and the number of children entering out-of-home care is escalating. 

TACSI was given a brief by the South Australian Government to help reduce the number of families needing crisis services and keep more children out of the child protection system.

It worked with families over a 12-month period to co-design Family by Family, a peer-to-peer program that taps into the strengths and experiences of families who have been through tough times and trains them to support families who are going through similar challenges. 

One professional family coach works with 15 “sharing families”, who provide support for 40 “seeking families”. The program reaches 100 children at risk. TACSI reports that the program has an unprecedented cost benefit ratio of 1:7, a significant saving for governments in keeping children out of state care and other child protection and crisis services.

“I don’t want to say it’s a cure for everything,” says Nicholas Gruen. “But I can tell you, it’s a cure for a large proportion of these problems.”

Who is your favourite business thinker and why?

“Warren Buffett, by so far it’s not funny. What’s not to like about Warren Buffett? He’s what all billionaires should be like. Immensely talented, basically ethical, deeply insightful, incredibly radical. He has the expression ‘institutional imperative’ – to grow rather than to husband the capital that your shareholders gave you and get the best return on it.

"He is so humble that he decided not to set up the ‘Buffett Trust’ but to give it all to Bill Gates [Foundation]. The guy writes his own rules, and he is just an extraordinary character.”

To read more strategy, check out the Slideshare deck below. 

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