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The Real Innovation:  No More Politics
A bi-weekly column with timely, relevant and possibly irreverent insight into the BC technology industry.

Something Ventured:
November 22nd, 2002


By Brent Holliday
Greenstone Venture Partners

 

"Complain about the present
and blame it on the past,
Get over it
All this bitchin' and moanin' and pitchin' a fit
Get over it, get over it " - The Eagles, Get Over It

 

I have ranted (and sometimes raved) about government policies towards technology, R&D and innovation in these pages before. With the amount of ink spilled on federal and provincial government policies, you'd think that there would be a real set of desired results and that these results could somehow make everything better. Well, unfortunately, politics gets in the way. It may be the best system we have, but democracy creates a weird reality that distorts initiative and makes cynics of most of us. Politics causes government policy to be short sighted (near term is usually less than the next election). It also causes pork-barreling (the process of giving money or favour to get votes).

 

The happenings of the past 7 days have driven the point home to me. In this week, we have seen Vancouver pull a Jesse Ventura in the election, we had an Innovation pow-wow in Toronto, the Global Competitiveness Report was released by the World Economic Forum, the Industry Canada Minister said that we should shoot for an 80 cent loonie and Sherry Cooper, an American turned Canadian economist, pointed out some interesting facts in recent economic policy history that make you go "Hmmmm".

 

In these pages one year ago, (November 23, 2001) I outlined some things that government could do over the long term to help our region be more productive. I still stand by these ideas as good policy. But I am not hopeful that many of them will be implemented and the fact is that larger macroeconomic forces can swamp the best ideas and initiatives. What we have to do is think longer term and stick to it.

 

This week, there are not many technology industry people out there admitting that they actually voted for Larry Campbell and COPE in the Vancouver elections. I mean, who voted for killing the golden goose? The face of BC's future changed in one fell swoop because we will not get the Olympics now. The argument of health care before Olympics is idealogically moral and sound. But the reality is that the two are not related!! Any dufus who thinks that the $2B of infrastructure upgrades to BC's roads, public transport and new facilities earmarked for the Games could be spent elsewhere does not understand politics. That money ONLY comes to BC FOR the Olympics. No Olympics, no money. Get it? Our health care is no better off with or without the Games. We would be better off as an internationally recognized place to live and do work (not to mention a few better roads and facilities). The benefits of showing the world what a great place we live in will die with the stupid referendum. By the way, the pompous COPE dolts get to kill the bid on behalf of the municipalities of Whistler, North and West Vancouver, Burnaby and Richmond without letting them vote in the referendum. Like that's fair.

 

The COPE landslide is depressing on many levels, but the impact on making Vancouver an internationally recognized place to do business (specifically technology) will be the lowest priority for the city council. Our schizophrenic political situation (provincial politics polarized with the city) negates a lot of any policy decisions targeted at spurring the technology industry locally. In the short term (next 3 years), we are on our own as an industry locally.

 

On a national level, I have been one of many people looking for a coherent strategy to emphasize innovation. The federal government has taken heed and charged ahead with their summit this week in Toronto. Old policies were re-announced and new ones launched. I would be ecstatic about the results if I wasn't aware of how the cloak of innovation is hiding a lot of political pork-barreling. Politicians have usurped the innovation agenda and used it to make costly programs that won't end up changing the status quo as much as they will hand money out in return for votes.

 

Terence Corcoran had a great summary in the National Post this week: "The plan, apparently, is to talk up the glories of past Liberal pork-barrel programs such as the Canada Millennium Scholarships, the Canada Foundation for Innovation, the Prime Minister's Caucus Task Force on Women Entrepreneurs, the urban spending strategy, along with the ethanol-biodiesel-battery-green-transit-housing -infrastructure-Inuit-aboriginal-openness- bilingual-diversity-nanotechnology-biotech- health-culture-software-training-Kyoto opportunities promotion innovation and cluster program." 

It turns out that the biggest drivers of innovation in the long term are, for the most part, already in place. We have a very favourable immigration program that brings innovators into the country (unlike Japan, a highly closed society, that I suffering badly without global ideas and perspectives). We have tackled the inflation monster and wrestled the deficits away throughout the 90's. We have started to lower taxes, both personal and corporate. We have a decent R&D investment system (ranked 14th in the world… could be better) and commercialization programs like IRAP. We have world-class universities and public schools.  Despite the hand-wringing, our health care system is superb (you receive top treatment once you are in the system, the problem is the wait to get in there). While we clearly need better policies on getting more investment happening and further streamlining our tax system to reflect the priority on innovation, our main problem here is that we live in the shadow of the U.S..

 

The Global Competitiveness Report has the US back in first place and Canada dropping from 3rd to 8th. When asked why Canada slipped so much given the positive economic news and a GDP growth higher that the US (who moved ahead of Finland, the top spot holder for two years) in 2002, Michael Porter, the World Economic Forum head of the report said that Canada is falling further behind the US in productivity per worker, especially given the currency difference (More on that in a minute). The US kills every country in innovation, not just Canada. But our proximity gives the perception of extra weakness. I didn't know this, but the US has a rate of 2.1 births per woman, while Canada has 1.5. As the US charges ahead, it is more than filling the backlog of future generations of educated, innovative and productive workers. We have to have open borders just to feed the pipeline (Japan, for comparison is 1.1... remember the closed immigration policy? They also have the oldest population in the industrialized world). Makes me feel guilty to have had a vasectomy… Damn, I'm not helping Canada be innovative anymore!

 

The programs announced at the Innovation Summit are merely short term tinkering. There is no bold new direction for the future because politicians don't get elected with 25 year plans. The short term tinkering is almost a waste of time and money, especially if the next government will kill it.

 

The clustering argument is also an interesting one that I have changed my position on. Clusters appear for a variety of reasons, but there is no known recipe to plant the seeds, till the soil, water the ground and create a massive cluster of one particular industry. Creating a local environment through policy is not the answer. Getting a bit lucky and working hard to create large successful anchor companies is the key. How else do you explain Microsoft? It was started in New Mexico and then moved to Redmond. There was no environment that particularly helped them. It just happened, due more to the business decisions of the management than anything that Washington State or local government did.

 

The 80 cent dollar goal set by Allan Rock this week was just plain folly. Again, politics overrides common sense. If the dollar goes to 80 cents tomorrow, we are dead in the water. The US would actually eat our lunch on the productivity side. Sherry Cooper long called for the government to take action on the deficit, inflation, etc. in order to boost the economy and have the market recognize the increase in value in our dollar. Today, with our economy growing at twice the US rate and our employment figures killing the US, our dollar goes nowhere. So Sherry has thrown in the towel and surmised that we are viewed as a secondary currency in the shadow of the US, our largest trading partner. Again, policy decisions that have been good for productivity are lost against a much bigger force.

 

So where do we go from here?

1) All the government intervention that I, and many others, have called for to improve our technology industry is useful introspection and debate, but is almost useless in the short term against much bigger global economic forces. Long term policies in tax, immigration, debt reduction and investment attraction are only useful if applied over decades.

2) Any changes to government policy are more often politically motivated, short term focused and don't realize the benefits intended.

3) If the government can't create innovation, I guess it's up to us in the private sector. We need to find and support the ideas and people that will grow and employ more and more.

4) We need to attract and keep smart, experienced people. That is only done through the opportunity to work at exciting companies and every effort needs to be taken to create and support these companies. To work here, in this amazing place, and be at the cutting edge of something exciting is what we sell to attract and keep people.

5) We need big promotion events, like the Olympics (does anyone deny that Expo '86 put Vancouver on the world map), to show the world what an incredible place this is. It is a shame that politics will kill a huge opportunity. You should write Larry Campbell and tell him to stuff his referendum. 

 

Focusing on short term policies for government is a dangerous game. Longer term commitments to a business friendly environment are what we need. As you can tell, I'm a little sick of the bafflegab coming from politicians. Real change happens slowly and the politics are a necessary evil of implementing change. I guess my last point is that our future is not as dependent on what the government does and does not do, especially in the short term. We need to do it ourselves and use success to drive a bigger industry.


What Do You Think? Talk Back To Brent Holliday

 



Something Ventured
is a bi-weekly column designed to supplement the T-Net British Columbia web site with some timely, relevant and possibly irreverent insight into the industry. I hope to share some of the perspective and trends that I see in my role as a VC. The column is always followed by feedback (if its positive or constructive. I'll keep the flames to myself, thanks).

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