Grant Petty doesn’t play by traditional business rules.
He mocks human resources departments who love to use psychometric testing. His accountants pull their hair out because he insists on paying more tax than he should. And, people probably thought that he was “pyscho” in the early days of building Blackmagic Design, a video equipment and software company that’s become so successful it made him a billionaire this year.
But, as Mr Petty points out in the new season of The Australian Financial Review’s How I Made It podcast, going against the crowd is part of the success.
He’s worried though. His industry is trying to grow in a country where the business environment acts like a straight jacket that favours ‘rule followers’ in property and mining and impinges creative companies.
“We aren’t really good at the creative businesses, but Australia has a lot of creative ideas,” Mr Petty tells How I Made It.
“There’s a lot of people who actually have good ideas and a lot of people that want manufacturing. I think what is depressing is the business people here are in some ways letting it down.”
He takes aim at “insane” accounting standards, which favour property and mining enterprises.
“They can’t literally value IP,” he says.
“Ever since the 70s we’ve had software. We have had computers and software coming into the ecosystem and part of the economy. Rock n Roll and television and radio and all that [were] also IP-based businesses... people don’t understand like, how do you value any of these things?
“So if I outsource some code or a product to someone and it cost me $1 million, is it worth that? Or if I make $10 million from it, is it worth $10 million? If I use most of that code in another machine, but only spend an extra $100,000 and I make $10 million off that machine, is it worth $1.1 million or $10 million? There’s just no way of valuing IP and IP have become major parts of our economies.”
The standards suit property-based businesses and as a result, there’s plenty of real estate, retail, farming and mining companies.
“So what you’ve actually got now is a whole bunch of people who specialise in regulation and accounting standards running business.”
Too many people care about ‘looks’
Business is too myopic in Australia and class-driven, he says.
“Australia’s economy has fundamental problems. It’s a class system. We have a property-based economy that’s got an obsession with essentially how people look,” Mr Petty says from the company’s Melbourne offices.
“I just think, wow, this is amazing. You’ve never built something like [Blackmagic], how would you know? You’ve just gone and been employed at various companies and you know the rules; knowing the rules doesn’t make you an innovator. That just means you know the rules.
“They know the rules. And if you don’t know the rules the way they do, then they think you are not professional.
“That’s not really how business is supposed to work, maybe government works like that, but not business. Business is supposed to be swashbuckling and adventurous, right?”
Mr Petty, 54, who lived in the same housing commission in Victoria that Ruslan Kogan also called home, confesses to “rorting” the unemployment system. After finishing high school he claimed unemployment benefits straight away, which was allowed in those days. The cash funded textbooks and a $78 enrolment course for TAFE.
“When you’ve come from that background, and you realise that the world you’re in is too fat and too lazy and too slow and too greedy, you realise that what you actually have [the company] is ... a very nimble, unconstrained thing,” he says.
Australian taxpayers have since made a good return, with Blackmagic paying $60 million in income tax in the past two years alone. The company has generated more than $3 billion in sales, with revenue last year surging 47 per cent to $769 million for a net profit of $153 million. Mr Petty sits at 101st place on the Financial Review Rich List with an estimated wealth of $1.38 billion.
Blackmagic’s tech has been used in movies such as Men In Black and Fast & Furious. Its cameras shot Captain Marvel and The Lion King and its production switchers handled the sound and vision for Elton John’s Farewell Yellow Brick Road tour. And there are hordes of YouTubers and social media stars using its gear.
VC and PE ‘monsters’
He’s also doing his best to keep the “rule followers” out of his company, even for external capital needs.
“I prefer to be listed on the stock market where you can have a wide range of investors and people that can make decisions on whether they’re into you or out of you, then I would be to deal with a monster,” Mr Petty says.
Private equity executives would “smell good and wear the right suit” but would think his operation was “unprofessional or rough” while venture capitalists are “monsters” who want to focus on a subscription model.
He’s passionate about keeping his business simple, even if it means paying more tax. “I know we pay more tax than we should, the accountants hate that,” he says.
“But if we try and set up the company to be more complicated than it is, then it becomes like a complex system. Look at space shuttles. They blew up because they were too complicated.
“The trick is to keep the company as simple as we can, even if it means paying an extra $1 million dollars tax for some R&D thing. Who cares? We can make more than that in a day. So let’s pay the tax and keep the thing simple so that the products become our focus and the products are where the really adventurous stuff happens.”
Hear what it takes to earn your way onto The Australian Financial Review Rich Lists when our podcast interview series, How I Made It, returns for a second season on July 18. Sign up where you podcast or on Apple, Spotify, Google
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