Special thanks to our show partners: One NZ, 2degrees, Spark NZ, HP, Workday and Gorilla Technology.
Episode Transcript (computer-generated)
Paul Spain:
Greetings and welcome along to the New Zealand Tech Podcast. I’m your host, Paul Spain and real privilege to be catching up with Rod Drury again.
Rod Drury:
How are you, Rod? Privilege. It’s all mine, Paul. Did I Hear it’s your 750th episode?
Paul Spain:
It is. I don’t know how they clocked up. It seemed like yesterday we were recording our first episode or two.
Rod Drury:
That’s just such a huge achievement. Thank you for all you do for New Zealand Tech. I mean it’s been consistent for him how many years now?
Paul Spain:
Fourteen, something like that.
Rod Drury:
Yeah. Good. Well great to see you.
Paul Spain:
Yeah, well thanks for coming in. Yeah, always, always interesting to have a chat. We don’t always agree on, on everything but that’s, that’s part of the fun. Of course, a big thank you to our show partners to One NZ, 2degrees, Spark, Guerrilla Technology, Workday and HP.
Great to have their support of the New Zealand Tech podcast and of course of the broader tech and innovation ecosystems that they support across New Zealand.
So lots going on in your world. Maybe a bit of a, bit of an overview for those that have been, you know, wondering what you do. You’ve, you know, you step back from, from zero. So that sort of has taken a little bit of a load off you and your LinkedIn profile for a while. I don’t know if this has been updated recently but last I looked it said fun employed, which always makes me laugh.
Paul Spain:
But you’ve actually always got lots of things going on in the background.
Rod Drury:
Yeah, lots of things on, yeah. No, sort of retired from full time CEO at Xero probably five or six years ago now and off the board for the last year and a half, two years. I think the annual meeting might be today or tomorrow actually. It’s kind of amazing looking back at where Xero’s at in the last, after being years of a loss making public company, in the last year we’ve done a billion dollars of profit, 30 odd billion market cap. Apparently we’re the largest listed company in New Zealand. So that’s pretty cool after all those years. And the team just keeps going from strength to strength.
Paul Spain:
Yeah, it’s really an incredible story and I think also must be really interesting for you to be able to actually take your hands off and see it continue to go and all the momentum just continues. Obviously a really talented team operating the business.
Rod Drury:
Yeah, it’s all in different phases so it’s very much becoming a US managed business. So as we’ve got to scale, you look at the market share we’ve got in Australia and New Zealand, we’ve done an amazing work here. If you think about any kind of business software having the sort of market share we have really hasn’t been heard of in that many spaces. So if you do accounting software, well, it is a winner takes all market, which is super interesting. So we’re now definitely critical infrastructure in Australia and New Zealand. There’s a lot of responsibility that comes with that. And then as we’ve got to the size we are, we’re able to get that top talent in from the States now. And Sukhinder’s doing an amazing job building a great team.
Rod Drury:
We just did a massive acquisition which is going through at the moment and yeah, the business gets just bigger and bigger and bigger. When I finished five or six years ago, it was the kind of technology roadmap was kind of there. It was much more around the people side of how do you have different people in each country? And as you know, if you’re building a business from New Zealand, it’s just so much travel. So I was early 50s and I’d just been traveling for years and years and years. So it’s been nice to not do that as much. But really proud that our values have continued and just seeing, you know, staff that came in to Xero as their first career are now senior leaders in the business, which is exciting.
Paul Spain:
Yeah, yeah. Oh, it’s really neat. And you know, in terms of, for those kind of, you know, you know, looking in from the outside and you know, wondering, you know, what’s next for Xero? Anything that, you know, that’s sort of exciting you at the moment.
Rod Drury:
Yeah, well, I can’t really talk too much about what they’re doing, but from what I see, you know, with the data scale we have, there’s some really interesting opportunities. So I’ve been kind of making a pest of myself in there, working through how do we connect the New Zealand banks closer to zero and how do we reduce fraud, Digital identity, Super interesting. And there’s still a few projects that I’m always advocating that we should be doing. But the interesting thing about businesses as big as zero, you’ve got so much code and it does take a while to get through. We’ve got code that’s 16, 17 years old and stuff that’s brand new. And we’ve got customer because we are such a critical bit of software for all of our customers. They have really clear demands around what we need to do next. And I think the last four or five years we’ve really focused on getting through those things.
Rod Drury:
But with what’s happening with technology, some huge opportunities as well. So my kind of voice from the outside is just saying, hey, these are the things we can be doing. And it’s kind of fun as a founder going back in and evangelizing those things. Got some really interesting meeting with banks over the next few days which is I’m quite looking forward to. So still doing a bit of work in there but yeah, yeah.
Paul Spain:
Oh that’s good. We’ve got just a couple of buildings over emerge. I’ve been having some interactions with them and not a bank but they’re one of the newer institutions and so yeah, interesting. Just getting that LinkedIn to Xero very easily and what they’re able to offer and I think these new kind of fintechs really nudge the banks along and so on but it’s a whole lot easier than it would be otherwise. The fact that they can easily tap in and link into Xero so you can get your data easily there.
Rod Drury:
Yeah. And in New Zealand with the open banking progress, so that gets really interesting. Towards the end of the year I think MBIE is going to be a certifier for all of the open banking providers. You don’t have to have a contract with each bank, you’ll be able to get certified by mbie. So it’s interesting though it’s quite hard to work out exactly where open bank banking’s at. So kind of spending a little bit of time in that at the moment just put a bit of money in to volley one of the. Quite like those guys doing some cool stuff. That space interests me.
Rod Drury:
So I think there’ll be a lot of innovation over the next 12 months to see what happens here because one of our issues that we haven’t done in New Zealand is we haven’t really addressed the impact of globalisation on a small country. So you know, we’ve always, we used to be really proud of our EFTPOS payment network as an example but over the last few years we’ve seen, we haven’t been investing in that network. So without even doing a managed retreat, we’ve been passing quite a lot of value to the overseas schemes. And you know, that’s a 2.5 to 3.5% tax on all small businesses and there’s just been some work done around surcharges. Hopefully there’s some stuff on tipping as.
Paul Spain:
Well which isn’t part of our culture.
Rod Drury:
But that’s what we’re seeing happening is that over the last five or six years global providers who operate from a low cost capital environment can build global platforms and roll them out very inexpensively to small countries. And it’s very hard for any providers in a small country to compete with global might. So Uber was a good example of that yes, you know, Uber Eats took a whole lot of value out of the restaurant system and then ended up building dark kitchens and all that because they have the relationship with the customer, which is interesting. And booking.com in the tourism space could be a 35% tax on all of our operators. They don’t get paid till the very end and they hide who the customer is from the tourism operators who are doing better work in that space as well. So yeah, there’s a lot of things that we’ve been quite passive on and I think there’s an opportunity for us in New Zealand, especially on the business side, to really lead and address some of those big problems and move things forward.
Paul Spain:
Yeah, these things have concerned me for a long time as just what a really big global entity. In some cases they’re trillion dollar businesses, the likes of Amazon and so on. These are really big players and it’s important that we don’t just kind of give everything away to those international players and all their var. Of course, I guess that’s, you know, it’s the flip side when it’s a New Zealand business going out to the world, we want to be able to, you know, do as much as possible as easily as possible. But you know, realistically, most of these big players are going to be American or you know, domiciled somewhere else. And yeah, their ability to kind of come on and come into the market and potentially squash our local entities is, you know, something that we’ve got to keep looking at and thinking, how can we help our local entities more innovative.
Rod Drury:
The frustrating thing is we seem to be so passive about this stuff, but yet we’re such a small place and we all know each other. I mean, 5 million people, we’re a small city in any other country. So our competitive advantage should be that we can get together and actually have a strategy. So doing a little bit of work in the tourism space at the moment, coming up with a national data architecture for tourism and it’s a good example where you can go and talk to the industry association to Tourism nz, do a bit of a prototype, take into account all the needs that we have because we want to grow our tourism spend, make sure we have high value spend. And if we’re passive and we’re acting as individuals, then the likes of booking.com can come in and they have a valuable service, they bring a lot of customers. But we should also have a way that people can book, that people can come and book directly that the make our tourism operators more sophisticated with our technology, drive more yield out of their businesses. And an individual tourism operator can’t do that, but the industry working together can. So that’s an example of a project where I just think it’s a good thing to do.
Rod Drury:
It’s interesting. So I have the time and the resources to lean in and do that sort of work.
Paul Spain:
Yeah, that’s great. I’m not sure if you’re across what’s happening in the golfing area. I was just speaking at the industry conference on Monday, but what stood out to me that I hadn’t really paid attention to is this entity called Dot Golf, which is effectively providing technology right across all of the golf clubs and so on in New Zealand. And so you’ve got this one entity that’s focused on serving that, and now they’re half owned by, I think, Golf NZ and the other half by rna. And so that’s a global thing. So now the technology they’ve developed globally not only gives New Zealand, you know, a much better, you know, positioning, we’re not needing to use other tools from elsewhere that aren’t really well suited, but now that’s sort of being rolled out into other markets internationally. And I just thought, oh, this is a. This is a good example where the industry has actually worked together and effectively the industry owns something that’s a pretty innovative platform.
Paul Spain:
Great to hear, from what I can tell. So that’ll be one. I’ll be delving into a little bit more to find out if it’s as good as it sounds. But, yeah, I look at other areas and, you know, the likes of what, you know, what Uber did in terms of that sort of global dominance, and I think, you know, they were pretty relaxed around, you know, being compliant and following various sort of forms of legislation and that allowed them to move really quickly. Our taxi industry and I guess the taxi industry globally, you know, they probably could have innovated a whole lot better and faster and coordinated in hindsight. But I see, you know, issues with a lack of legislation to sort of stop some of these players coming in and being bullies. Right. So is that what you think would be maybe a solution to some of the ways that the likes of booking.com operate? Do you have to legislate to get that right?
Rod Drury:
No, I think government is a last resort. I think if you can understand the opportunities and talk to people and have the resources to put a bit of effort in, then you can get in New Zealand, you can get things done pretty quickly. So there’ll always be a booking.com, you can’t keep them out, but there could be a New Zealand based service which actually is much more understanding of the needs and the risks that we have and we can lead. So that’s the work I’m doing at the moment. But it seems like if you don’t act then you just get steamrolled. But as you’re saying, it creates opportunities. If we can get things working here, New Zealand’s a great test market so then you can take it to other countries as well. But I find when you move out of a founder led company back into civilian land, you just see this lack of urgency everywhere.
Rod Drury:
So you know, I think business can really lead and do great things. You know, creates jobs, creates opportunities. But you’ve kind of, kind of got to go and do the work and so that’s what I’ve really enjoyed. So back to your first question. What are you doing? It’s those sort of projects. So looking at fixing some of our infrastructure problems, using Queenstown as a bit of a test lab to show because I kind of forgotten to do things. So we’ve forgotten how to do things, I think. So if we can make your own local community better and then use that as an example and start changing culture because we’ve got to create, you know, reasons for our kids to come back and all those things.
Rod Drury:
Yeah.
Paul Spain:
So what are the things when you, when you look at, you know, Queenstown and you know, that broader district are the opportunities? I see there’s, you know, there’s you know, been some leadership down there in terms of electrification and carbon zero, interesting moves around new transport, sort of Frankton and the airport into town as potentials. Seems to be also quite a lot of folks from the broader tech world, often folks that have maybe come back from overseas. You know, there’s quite a concentration of, you know, talent across, you know, a bunch of areas. What do you see as the most sort of exciting things going on or the exciting opportunities?
Rod Drury:
Yeah. So the first question is why Queenstown? So when you stop kind of working, I mean, I’d done the Wellington, Auckland grind right through my working life.
Paul Spain:
Yeah.
Rod Drury:
And when I didn’t have to go to work every day it’s like, whereabouts do you live? Wellington. You know, it’s a bit windy, bit cold, great windsurfing and I didn’t really want to live there. I’d been there most of the time and then I didn’t really want to live in Auckland. Didn’t have to work though. Auckland’s convenient because of the one flight to a lot of places. So really the only other place that made sense was going to Queenstown. So I thought I’ll get a place down there and you know, maybe do some skiing. Realized that actually the summer down there’s fantastic.
Rod Drury:
Got into biking and all those things and Covid was pretty special actually probably sounds terrible to say, but essentially the tide went out and you could meet all of the locals. So over those years got to meet lots of people down there, which was great. Got back into biking and realised, you know, from that snow was probably going to get harder. Biking was starting to grow. What they had built down there as a world class biking destination was pretty underfunded because it’s a distributed industry. With skiing you’ve got CEOs and marketing people, you can count the numbers. With biking it’s just distributed through the community. So put a little bit of philanthropy into building some mountain bike trails and that and that feel like a really good bang for buck.
Rod Drury:
And that’s been a lot of fun over the last few years. And then realized, well, this has actually become home. And then you kind of look around, what are the issues? So we don’t have enough electricity coming into the basin. We don’t have physical diversity of supply. The, the roadings got worse. So our quality of life’s gone down because we’re sitting in cars and seen some really bad procurement. I think we got a $250 million roundabout, which is crazy. So we’ve forgotten how to procure infrastructure and do infrastructure and that’s like going to be a five year project.
Rod Drury:
So that’s annoying. So we need to fix public transport. It’s one of the place, I think 70% of the people that need to travel more than two hours to go to hospital are all down there. So we need some more public health. But yet, because it’s a long way from Wellington and it’s perceived, you know, there’s a lot of affluence down there. It doesn’t get a whole lot of money spent down there yet all the tourists go there. So the judo move been kind of working on is how do we use tourists to fund our infrastructure. So one of the fun projects which is well advanced now is our public transport gondola from the airport up to Queenstown Hill, along the top and down into town.
Rod Drury:
And if you look at what roads cost and that sort of stuff, especially our stupidly expensive roundabout, that’s about a $400 million problem to solve. And so it needs about 45 million a year to run. And we’ve got up to 3 million tourists. Imagine if you get to Queenstown, you tap in, it’s 50 bucks for a week. So you use it all the time. You know, how many of those 2 or 3 million tourists pay 50 bucks a week? And so you kind of, the numbers start to work out. So in the private sector rather than, you know, so what I ended up doing was working very closely with Ross Copeland. He was the CEO of Infrastructure nz.
Rod Drury:
When he stopped working there and was looking for a new job, I said, well, actually, why don’t we just spend a couple of years fixing Queentown’s infrastructure problems and spend a bit of money. I kind of call this venture philanthropy. It’s putting money into things that should be done and maybe they return, maybe they don’t. But it’s been a lot of fun. So what we’ve done in the private sector is basically do all the work. So if you’re not kind of working for one company, you can talk to council, you can talk to Waka Katai, you can talk to Otaga Regional Council, you can work with vendors overseas. So we’ve done kind of all the groundwork of what a gondola would look like, what it would cost. We’ve even funded the design of all the base stations so we can get the cost pretty accurate.
Rod Drury:
We’re now working with super funds on how to fund it. And, you know, within six or eight months we’ve got a very viable project. Hopefully it’ll go for a fast track consent later this year. And our kind of interesting thing now is how do we get the community to own it as much as we can so that rather than ratepayers having to have the burden, they can get the income of tourists coming in to fund our other infrastructure as well. So that’s a good example. And then doing a lot of work on a public private hospital down there. And what that means is we’ve been doing the demand study of what the public health system would need down there and also what private players are there. And if we can get like a lease from the, from the government, then we can build a certain size of building.
Rod Drury:
So again, that’s just doing the work, talking to a lot of people and making some good progress on that too.
Paul Spain:
Yeah, yeah, that seems to be a bit of a trend in that direction, doesn’t it? And if it can be made to stack up, then the dollars will come to deliver it.
Rod Drury:
Yeah. And it’s like there’s a lot of things, oh, you know, private sector, you know, it’s not a private Hospital, It’s a public private hospital, but it’s a single bit of infrastructure and the private sector can take the risk rather than the government doing it. I’m not sure exactly of the numbers, but, you know, in the private sector we can probably build a public hospital at about $15,000 a square metre, whereas in the public sector that’s like $35,000. So there’s opportunities to do things for good. So all my experience working with entrepreneurs and I remember this really clearly when I was at the Entrepreneur of the Year Awards in Monaco a few years ago, all the entrepreneurs were thinking, you know, the discussion was the jobs they’re creating in their own community, the public good they’re creating. And it’s nice to get to this point where you can use your kind of private sector schools to do really good things for public good. And again, it’s got a philanthropy. If they return, that’s great, but that’s not the motivation.
Rod Drury:
In fact, the motivation is to get some of these things once you’ve taken the initial risk out, owned by the public. So again, we can reduce our rating burden and taxpayer burden.
Paul Spain:
Now, onto another topic. This one came up over our emails. Digital identity. What are your thoughts on where New Zealand needs to be, needs to be heading here? Because we seem to have this global trend to move to digital identity. There are, I think, you know, a bunch of different perspectives. I was chatting to Andy Higgs of Digital Identity NZ recently. You know, they’ve got some particular thoughts. There’s, I guess, government perspectives and then there are the, I guess the concerns around, hey, there’s always dark sides with any technology and how do we get that right? So we get the right pluses without creating too many negatives.
Rod Drury:
Yeah. So I recon, digital identity is key, right? In any sort of group of applications, knowing about the resources on the network allows you to do a whole lot of really smart things. And we’re certainly not early to the race in this. We’re kind of very late. So we get an opportunity to learn from what others have done and pick the right technology. So absolutely needs to be private. But I think, you know, with the last sort of five years of mobile and social, people have given away a whole lot of privacy. Doesn’t mean that we don’t have to, but I think people are more have already voted for convenience.
Rod Drury:
But I think we can also build a digital identity system which has really good privacy. It’s so vital, though, because it’s really hard to get the productivity we need without knowing who people are so, you know, and it’s frustrating. We talk to government people, they’ve gone to Estonia to see how things are done. And again, we’re a city of 5 billion people so we should be the best at this because we all know each other and there’s not that many of us. So we did a lot of good work probably eight or nine years ago with the New Zealand single business number. So we’ve got a key for each business and that’s actually gone quite well. So now the next thing is how do individuals log on so you can interact with government and interact with your company’s office record. So are you a shareholder, a director, a tax agent, all of those things.
Rod Drury:
So mbies pushing for that pretty hard. It’s been a long process, but we’re finally getting there. It looks like Matt has been awarded the identity part of the contract, which is good. What’s changed though is I think the good thing about being late to the party is the. The banks especially are very interested in this. I mean chatting to CEOs and most of the banks and they have such a big fraud issue. And if there was, I think we have an opportunity to have a digital identity system which isn’t just a government system, it’s actually a New Zealand system. So you have the banks using it, maybe Xero uses it, government departments use it, so you’d be able to log on.
Rod Drury:
It doesn’t mean that each government department knows everything about you. They’d only be allowed to know the parts that they know. And it was interesting working with MATTR when the before 16 thing came up. So I asked Claire if she could do a quick demo of that so she can with using that MATTR technology.
Paul Spain:
So the before 16, this is the block access to social media. Yeah, or just getting into potentially different ages.
Rod Drury:
And the prototype she did was really cool and they did it super quick cause they have a attributed identity system. So you can basically tap onto a terminal and get a green red are you over 16 or not without giving out all of your private details? And I thought that was a great example because it shows that with a attributed modern identity system you can do all of these things, still maintain privacy, but have this convenience. So there’s still a bit of work to do around who’s the issuer of credentials. Is it tied with our passport, our driver’s license or some other system? So DIA is working through that at the moment. But I think there’s a good technology platform and if we know it’s MATTR, then the banks, Xero and other myob or other providers can start linking with that and that allows you to start reducing fraud because you know about nodes on the network. Also with AI and agentic technology, if you know who people are digitally, then you can go and write systems that go and do work on behalf of people, which could drive a whole lot of productivity. So I think if you think of areas we can lead, the whole govtech space is super interesting. And once we get the identity system solved, when they’re talking about having that this year, then a whole lot of innovation will happen with that.
Rod Drury:
Combine that with open banking, it gets super interesting. So with open banking, I’m seeing transaction fees down to about seven cents a transaction rather than a clip of the ticket, two and a half percent. So once digital identity is in place, the business case for it, which unlocks a whole lot of government projects, could be open banking using those digital identity systems as part of the mix. So I’m really excited about it. I think it’s going to create a whole lot of innovation and business opportunities for New Zealand startups over the next few years.
Paul Spain:
Now you mentioned sort of a 7 cent transaction fee. Where would that sit? Because there’s been talk around the APIs and costs to do with APIs.
Rod Drury:
So this comes to the two different payment networks, right? So we have our EFTPOS network. With EFPOS network, you’re authenticated and the money moves directly and then it can move between banks as well, whatever cycle they do. I might be down every 15 minutes now, which is great. So you can move money and it’s moved with the credit card schemes, that money can be reversed up to six weeks later. And so there’s a transaction fee for that, but it’s a percentage of the transaction. So that’s fine for small payments, maybe if you have a reasonable fee for that, but for large bills, like paying a $10,000 invoice, you don’t want to pay 2.5% on that. So what’s happened is we haven’t been investing our domestic payment rails and when Apple came out, I think it was iOS 18.2 or something, they were opening up the secure enclave. So there’s a good discussion we had with the bank.
Rod Drury:
So, okay, now can we do contactless domestic debit? And the banks were like, well, there’s no business case for us doing that, which is like, ugh, okay, so maybe then we move towards the open banking system. So the principle should be that the cost of a transaction or the charge, the fee for a transaction should be related to its costs. So with credit card schemes, you know, 2.5% I guess it relates in terms of the risk insurance. But if you’re moving money and it just moves it just, you know, it costs nothing to do it, you know, it’s nanosense. So getting down to sense of a transaction and why it’s interesting from the govtech space is there, I think about a third of all payments are originated by government. So imagine if you’re, you know, paying your police fines or your Northland toll road fines and it was just, you know, just a straight per dip fee. So all of that, all those conversations are taking place at the moment, which is really interesting. So after years of not doing much with our much loved previous banking system, I think a lot of innovation is starting to happen.
Rod Drury:
The question will be will Apple allow us to use their standard tap and not get a percentage fee or will they allow a per dip transaction and how much of that goes? And I think that’s an ongoing discussion with the Commerce Commission.
Paul Spain:
Yeah, yeah. And you know, I think these are some of the areas where.
Rod Drury:
You get.
Paul Spain:
Those challenges because you know, global entities that are very reliant on one particular business model in one country aren’t always so flexible to align with what.
Rod Drury:
And remember, like we’ve done a lot of work on trying to tax those globalists like Meta and Google and Apple. And you know, there was the idea of a few years ago was we’d, you know, because they don’t care about New Zealand so they can be pretty tough with us. But now with all these trades and tariffs, my understanding is now if we, we’ve kind of given up all of that. So there’s a lot of organisations that are shifting, you know, the subsidiaries in Ireland, that sort of stuff and they’re not paying that fair share of tax being here. So again, this has a major impact on small countries, but it’s tied into all these trade war things. So it’s a really tough position. Which means I think we have to be much more active around some of our sovereign services. So our payments networks probably should be sovereign and the Reserve bank is interested in that.
Rod Drury:
But we should have some alternatives where we can keep that money onshore and keep that investment onshore and just not have these large economic rents go out to these global companies. Yeah.
Paul Spain:
What’s your view on how we’re doing with the hyperscalers? So we’ve got Microsoft obviously established themselves in New Zealand. The other ones, it’s not quite clear whether they’re actually gonna finish the job. And whether we’re gonna see AWS and Google go ahead and turn the lights on with significant data centres here. Cause that’s frozen up a bit.
Rod Drury:
Yeah, actually I’ll be able to tell you in two hours. Yeah, I mean that’s the ask is to. And I think governments are quite good at putting pressure on. So there’s an Australian top secret cloud now and that’s oop cramp. That’s given us confidence that we should be able to do something here. There is a planned AWS data center here. I’m not sure where Microsoft’s at the moment. Hadn’t checked on that for a while.
Rod Drury:
But I think now we suddenly have those conversations around our payments networks and I think seeing geopolitically the risks, you know, having the Chinese warships flying around and we know they’ve got the capability to cut cables though I think if we did cut a cable we’d be pretty screwed. But there may be some things that we need to make sure are hosted here and that leads to energy sovereignty, a whole lot of interesting things. Yep, yep, yep.
Paul Spain:
Now yeah on the back on the digital identity. So your, your thinking is that that should be. That should be run privately and not, you know, not owned and controlled at a government. Government level.
Rod Drury:
Well, I think, well efforts. If, if MATTR is doing that then it would be run and hosted essentially through Spark. I’ve noticed today they’ve sold three quarters of their data centres and that actually sounds pretty good. Spark’s a New Zealand listed company so people can invest in it and then it’s providing a key service to the government but then banks in that can also get that same service. So that’s the discussion we’re trying to have with DIA at the moment is doing a workshop now because I think what the requirements may have been a few years ago and now I think the banks are really interested in the space and banks are in a tough position because they’ve had so much regulatory work they’ve had to do. It’s hard for them to. And fraud is such a big issue with all these Internet scams and AI is contributing more to fraud. They’re spending such a fortune on fraud reduction that’s hard for them to do the innovation work that they really want to do.
Rod Drury:
So doing things like making it harder to do fraud frees up resources to do more cool stuff on their mobile apps that we all touch. So I actually quite like the idea of MATTR being owned by Spark and then hosted so that they’d have a service contract with the government. But Also could work with the banks as well, or it may be distributed and you could host your credentials with a bunch of organisations.
Paul Spain:
Yeah, Yep. When I talk about the digital identity topic, there are always a bunch of people who are saying, look, you know, look at what goes on in authoritarian regimes and what they’re doing with social scoring and, you know, Big Brother type stuff. How, how do we make sure that we, we put in place mechanisms that are, that are robust against kind of, you know, I guess, bad behavior from a, you know, a leader who maybe doesn’t have everybody’s best intentions at heart in the, in the future or a government that, that pushes a little bit too right or too left or whatever it is.
Rod Drury:
Well, I think we’re all left in our governments, both in New Zealand. Right and left, we’re pretty left. So I think that’s a role that we can really lead the world in. Again, we’re small and nimble enough and we’ve got some great local providers. So I think New Zealand has a real clear conscience on this stuff. And after the AI report that Shane Reddy’s office put out, there’s been quite a lot of conversations around where we can actually lead and do something different. And it all comes back to trust and privacy. So I think New Zealand’s well placed to lead on that.
Rod Drury:
And we just don’t have the types of governments, left or right, that are authoritarian. So I think there’s an opportunity for us to really lead on this space and show how to do it well. I mean, I don’t want our politicians going to Estonia to see how things happen. We want everyone in the world coming here to see how it’s happened. So we’ve got to leverage the, our nimbleness and this is such a good opportunity to do it.
Paul Spain:
Yeah, yeah. I mean, I think there’s some benefit in coming later to these things because you can see what’s going on elsewhere, of course. But I think one of the long term challenges we have with new technology is working out how you get the guardrails and how you balance it.
Rod Drury:
Right.
Paul Spain:
So we’ve kind of maximized that positive uplift we get from it. But you know, we minimize the downsides.
Rod Drury:
Right. We’re really good at, you know, in New Zealand we’re great at building stuff. Right. You know, we’ve Got Xero, got 4 million customers around the world and the technology is pretty nimble. So you can get started on some safe scenarios and build the experience so we don’t have to have a Rolls Royce digital identity system. From day one, doing things like, you know, payments of fines, you know, pretty low risk because people aren’t going to put their credit cards in. You know, they don’t need to. So there’s some scenarios we can strengthen it in real time.
Rod Drury:
That’s pretty possible with the technology. So we shouldn’t pat ourselves on the back by being late. That’s annoying that we’re late. We can sort of say, well, but it gives us new opportunities, learning from other people. And the matter stuff’s really interesting because they’ve done some good work overseas. And so just because they’re kind of using international standards, we may end up with interoperability with Australia and the US So with the new kind of US passport or the new travel rules, their system called real, not our real system, but their one, you have to have a passport or a modern driver’s license. So by, you know, picking the right vendor, we might free get interoperability when we travel globally, which is kind of interesting. And I don’t think there would have been a requirement two years ago.
Rod Drury:
Yeah, yep, yep.
Paul Spain:
Yeah. I guess there’s working out how that data sort of moves around and how people have confidence in the approach to that. I think, you know, one of the things we’ve had traditionally in New Zealand is, you know, government departments being pretty light in terms of their ability to access, say, you know, data that’s held in the databases of other, you know, government entities. But I can imagine, you know, moving into a world of digital identity where you end up with, you know, if you’re not careful, data sort of floating around sort of more and more. And I think often there’s really good justifiable reasons why you do it, but it’s.
Rod Drury:
Yeah.
Paul Spain:
How do we make sure that that stuff doesn’t maybe move too fast or, you know, we end up in places where, you know, if you asked about it today, there wouldn’t be social license, but over a bit of time, you know, governments get more and more social license to do more with. With these different systems.
Rod Drury:
Yeah. I mean, the best thing the government can do is engage with industry, engage with the experts. So there will be expertise inside government. Sure. But, you know, it’s pretty easy to, you know, we’re in a small country, it’s pretty easy to do workshops, just give people three or four weeks notice, get the right people in a room and nut through some of these issues. Because I think the days of I can’t, you know, I get annoyed when people complain about government. It’s actually business that drives Things forward and does the work. Cause they have money and people.
Rod Drury:
And I love the idea of the government working out how much better to partner with business. So rather than saying look, here’s the solution we’ve designed internally inside government and doing a little RFI salami ing up little bits and pieces, actually start with a workshop in the industry, have a vision for New Zealand that contributes to our goals and then work out how to partner with the right people. Are they good New Zealand providers? Do we have good global relationships with the hyperscalers? You know, what are the, you know, together you get a pretty frank discussion. But we should be iterate on that stuff very, very quickly. Yeah, that old chestnut and, and then.
Paul Spain:
The AI strategy for New Zealand. What, what are your thoughts on? I guess what, you know, what’s been shared so far is, you know, is pretty, pretty light in terms of what’s, what’s out there. And look, I think there’s, there’s some, some benefits from, you know, not going too far and dictating, you know, too much of what we should be doing as a country. But I’m kind of curious of your perspectives on what the opportunities are that you see for New Zealand.
Rod Drury:
Yeah, I think the strategy was a bit of hygiene. Everyone has to have one. We were the last in the OECD to do it and it was probably pretty light. Unfortunately the US one came out sort of the week after that and that looked actually a bit more thought into it. But so that’s where we are. I think what it’s done is it’s got the industry now saying okay, well what is our strategy? And again, because I wrote a LinkedIn post about some things that could be in an AI strategy, but I think we can kind of move past strategy. I think it’s actually the idea that we’ve been having and talking to Shane about. Let’s find five or six examples where we can demonstrate the benefits of AI and show trustworthy AI and some really areas that make a difference.
Rod Drury:
So rather than thinking about AIs for AI sake, maybe health is one of the things. How do we reduce patient wait times? That’s interesting. Picking a few areas that we can be really good at. So something around the AG sector, how do we grow grass better using AI? And there’s some great companies like Holter just raised a whole lot of money. Be interesting to chat to them around. Where do they see opportunities? And maybe there’s like five AI challenges we put out there and give everyone like a year and then track those as case studies and then so people can see the benefits of this technology. So I mean part of an AI strategy, it’s very difficult for us to have the investment to build the next sort of horizontal large language model. And in the paper I wrote on LinkedIn or the little post I wrote on LinkedIn, I think at the infrastructure level where AI is a game changer is demand for renewable electricity.
Rod Drury:
So that gives us an opportunity to overbuild electricity. So that gets into our discussion around because there seems to be consensus that we need more fuel, whether that be hydro, more other renewables, more geothermal. But we need to do, we need to generate more otherwise we end up importing coal. And our issue with, and we’ve got a real issue with gas risk of gas not being here either. But what’s interesting about the coal one is we’ve only got small ports and there’s only a limited number of small coal ships. So we have this massive supply chain risk. And that we’re burning coal is allowing us to have a discussion around actually storing more water. So that’s interesting and that’s an ongoing discussion.
Rod Drury:
But if we know that we can sell all the renewable energy that we want, then you can overbuild. And I don’t think, you know, other generators or gen tailors would have had, you know, three or four years ago in their capital forward planning and business models, AI data centers. But that’s something that’s happened relatively quickly. We used to be, you know, when we did that Pacific Fiber project years ago, we talked about building data centers here but we’re you know, 120 milliseconds from anywhere interesting. So that doesn’t really work for those real time applications but for training large language models, you know, being 120 milliseconds away is probably fine. And Remy who did the Hawaii cable, you know, he’s got a bit of land there under the power lines from Manapuri to Tiwai. Yes, you would have to think that’s the lowest cost renewable energy and there should expect to be no marginal cost for that electricity. So.
Rod Drury:
And there’s talk about an Arctic cable coming up, Antarctic Arctic and then maybe a new cable heading to Australia, spearing off to Melbourne and Sydney. So you know, cold region, access to big hydro that may allow us to, you know, to overboard electricity which is, you know, a very relevant topic at the moment. So that’s at the infrastructure level. And then we’re probably not going to compete in the Hyperscalers with big LLMs though the LLMs will be biased towards the US so there may be an opportunity to localize them. But where we are good in New Zealand is building enterprise apps and being able to take small models or agentic technology where you do things on behalf of an individual, which is why digital identity is important. That feels like a really fertile space. So you look at government as a major procurer. That leads you to AI inside government.
Rod Drury:
And finding, you know, again, five or 10 examples of that that make a difference to all citizens is kind of interesting. That could be a good place for us to play.
Paul Spain:
Yeah, yeah, I think there’s, I mean there’s, there’s so many, there’s so many sort of potential opportunities. Now you, you talked about sort of some, some challenges to put out there. How would you see that sort of coming about to put out to industry on, you know, things that they could do with AI?
Rod Drury:
Yeah, we come back to government strategy. Right. So growth is one I talk about every day. So how do you grow, grow and productivity as part of that and then obviously reducing costs and. Right. Sizing things. So I mean those are the areas that you would look in the health 1. Reducing patient wait times without being a health expert sounds like a no brainer.
Rod Drury:
But in all those key sectors you look at what the government challenges are and then you ask the question, right? How can AI make a material and measurable difference in those things? And if they can touch most New Zealanders, people go, wow, that’s kind of cool. With AI, I mean, I’m trying to still get my head around some really practical examples and I’m watching lots of videos around how people are building businesses around AI. You gotta know about four or five different things and it’s quite abstract for people. But finding some good examples in New Zealand that touch most citizens sounds like a practical way to kind of jump forward from strategy into actual action and measurable results. Yep, yep.
Paul Spain:
Yeah. I guess there’s the challenge that, you know, we often see and that’s part of, I guess the guidance that we give to, you know, my staff and the clients that at Gorilla we work with, which is the human inspection of the AI output and we’ve still got this kind of quality challenge. So how you kind of, I guess scale up solving some of these problems and have that assurance that everything comes through well, even down to the tools that’ll maybe transcribe a conversation between a doctor or a specialist and a patient, you know, those things still, still need that kind of human element. Are you, are you seeing many people that have kind of really nailing it with those things and getting perfection. I mean, even if we look at our. For the NZ tech podcast episodes, we will put up a transcription of the episode on the. On the website. Apple, I think, do their own versions and so on.
Paul Spain:
But if you actually go through and read those, you know, a lot of it is totally fine. But then there’ll be stuff in there, you know, that’s rubbish. And I guess when we’re dealing with challenges in health and business and government and we’re dealing with real people’s lives, those sort of discrepancies. Right. Is something we’ve got to make sure that we don’t kind of cause a train wreck because we got it kind of, oh, it was 95% right. But it’s sort of solving those last things. And I think, look, there are a lot of cases where AI doesn’t need to be perfect and it just works. Lots of use cases where we get improvements and automation and efficiencies, but still seeing those kind of challenges with each new version of GPT or what have you kind of come through, you know, says to me that, yeah, we can’t just completely hand everything over to the AIs.
Paul Spain:
Right?
Rod Drury:
Yeah, no, exactly. And I think that’s. You gotta show those proof points. I don’t think it’s as sort of hypey as like blockchain was. And in the accounting industry everything was gonna be blockchain. And then we decided not to do too much with that. Cause it didn’t make sense to us. So that was a good decision.
Rod Drury:
But there’s a whole lot of reasons for that. But AI is in a little bit of that hype cycle thing. But I listen to all the podcasts that you do overseas and there’s whole podcasts that are just about AI. But I keep listening for that magic example. Feels like encoding, there’s a whole lot of positive stuff, but just with a coding demo about an hour or so ago, a lot of the stuff like Cursor and Windsurf and all that are great for doing some prototypes, but it’s not generating quality code. But it feels like there’s a lot of productivity there. So I think you’re exactly right in saying the same thing. Finding in New Zealand, we’re pretty practical.
Rod Drury:
If we can find some really good examples of. We’ve used AI to solve those core problems over the next year that could advance us. And I’m excited about. Because the great thing about enterprise technology is you don’t need a huge amount of capital so we’re not going to invest billions and billions and billions because we don’t have that sort of money. But if we can take the investment that others have done, where they’ve put billions and apply that technology into enterprise scenarios where you can sell your first five or ten by the heroics of the founder, then you can create some really interesting businesses. And if you look at the kind of bell curve of where the money will be made, there’ll be very few that make money in consumer cause that’s hard. But in that enterprise space, that’s where the bulk of the revenue will be. So I’m in that kind of discovery phase of find some really good applications.
Rod Drury:
So I’m listening to all the technology, thinking about how can I apply that to the enterprise because there could be some great businesses that don’t require a massive amount of capital that are magic. So with all this work we’re doing at the moment on the travel ones, actually really interesting. There could be some very achievable benefits. But I think that’s the challenge over the next year. I’m still slightly skeptical, but I’m also seeing how much hype is there, especially from a lot of the US tech podcasters around AI. So there must be something there. And I was just listening to a short summary of that Joe Rogan podcast happened this morning and apparently we’re all going to die.
Paul Spain:
So yeah, yeah, well, it’s, it’s easy I guess for, yeah, for the big headlines to come through. But yeah, ultimately we have to kind of drill into the detail and the nuance and you know, we. But I think, yeah, there are a lot of problems that we can solve by leveraging this technology better.
Rod Drury:
And that’s again, such an opportunity in a small country. Apply technology to high value problems and they don’t need massive capital into them, which maps our investment profile.
Paul Spain:
And for folks that are listening in wondering where they should be focusing. Any particular tips from your perspective? Obviously, as Kiwis, we’re known for our creativity. We often do do well on the global stage in certain areas, but not across the board. What are your thoughts on where our real strengths are that we should be doubling down on?
Rod Drury:
Well, you know, if you’ve heard me talk, I’m a bit down on New Zealand at the moment, but I think we still have massive opportunity to play for and that is leveraging our small size and connectivity. Like you can get access to ministers, you can meet the bureaucrats that are driving these projects. You know, you can find end customers in the private Sector. Cause we’re all talking to the same people. So I’m really optimistic about that. But my big thing is we’ve actually got to do actions. And I think that’s the key thing. Having a national vision, putting some challenges out there and getting the relationship between the private sector and the public sector working.
Rod Drury:
Because it’s the private sector that gets the investment, does the jobs and creates jobs and those sort of opportunities. And there’s a bit of a narrative, always has been, that, you know, business is bad and evil and sucks profit. Yeah, maybe some do. But what I normally find is certainly founders are very passionate about the country and want to do cool things using tech. So that’s in the space I’m in at the moment. And it’s just super fun poking my nose into things that are interesting and seeing if we can help out.
Paul Spain:
Yeah, yeah. Well, it seems like you’re able to tap in with a lot of people, whether it’s, yeah, Prime Minister or across government or. Yeah, obviously other. Other founders in the. In the country. So, yeah, I’m really interested to see what these sort of collaborations will. Will bring up.
Rod Drury:
I love the whole thing of, you know, not ask what your country can do for you, but what you can do for your country. And we hit. We had a zero event out at Glenorchy a, a couple of months ago and, you know, we’ve got some really neat people in our accountant community and I was chatting to this, you know, really cool company in Christchurch and they were saying, you know, asking, how’s it going? Oh, it’s going pretty good, but it might get a bit quieter next year. And I’m like, have you been, you know, exporting to, you know, to out of Sydney or Melbourne? And I kind of looked at me blankly and I was like, man, you guys are on a global platform. You’ve on exactly the same technology that we’re using. You’re probably like 2/3, if not half the price of anyone else in those markets. So it’s not for other people to export. We can all export using these technology tools.
Rod Drury:
And once you kind of flip the switch and you say, okay, well, if we want to reverse the brain drain or if we want to drive productivity and we know that we’re like a low, we’re cheaper than other markets, but we have good professional skills. We’ve got these adjacent markets that are really close for time zones. And how many customers in Sydney, in Melbourne’s great. You can fly over once a month, have a nice dinner, buy some shirts and then come home and have this amazing lifestyle of living here. So, you know, I think for all businesses, you should be thinking about, can you export, you know, can you, you know, create new jobs by getting some overseas work and that, you know, being able to have exporting in your title, especially as a services firm, is really interesting. Yeah.
Paul Spain:
Yeah, that’s good. Oh, look, it’s been great to chat, Rod. Always enjoy, you know, your. Your futurist vision and the actions that you take. And I think that’s, you know, really inspiring and educational for others. But certainly, you know, my encouragement, you know, always, is that we. We, you know, we do have to lift up our heads and look away from the here and now, which is important, but we’ve got to be looking further out. And so, yeah, it’s great to.
Paul Spain:
Great to hear from you from that. That perspective. I think you’re one of, you know, one of the New Zealand’s greatest futurists, and, you know, you’ve made a huge difference to the country. So always good to chat and we’ll look forward to the next one.
Rod Drury:
Thanks. Paul booked me in for episode 1000.
Paul Spain:
Excellent.
Rod Drury:
Hopefully we’re still alive.
Paul Spain:
All right, thanks, Rod.
Rod Drury:
Thank you.
Paul Spain:
Well, fantastic episode. Great to catch up with Rod Drury have his input. Of course, a big thank you to our show partners to Workday, HP, Gorilla Technology, Spark, 2degrees and One NZ.
Now if you’re listening to this in audio, be sure to follow us on video channels so you can get the podcast across the likes of YouTube. You can follow myself on LinkedIn for the live streams that we do most weeks.
We’re also on X and Facebook, so if you look us up in those places. But great to have you joining us on this episode. Of course, we have lots and lots of other episodes across the New Zealand Business podcast. Lots of talks with New Zealand founders, business leaders and innovators as well as, of course, a lot more episodes. 749 other episodes of the New Zealand Tech Podcast. And you know, some of those companies that were mentioned on the episode are featured in their chats with the likes of Craig Pickett, the founder of Halter. In there we’ve got chats with Peter Beck from Rocket Lab across both the New Zealand Tech and New Zealand business podcast and many, many others. And further chats with Rod Drury, of course, as well. So thank you for joining us and I hope you enjoy those episodes and.
Paul Spain:
We’Ll catch you again next week haere ra.
