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We Rose To The Occasion
A bi-weekly column with timely, relevant and possibly irreverent insight into the BC technology industry.

Something Ventured:
October 13th, 2000


By Brent Holliday

"What on earth you tryin' to do
It's up to you, yeah you...
And we all shine on "
John Lennon, Instant Karma

It's up to us now.

Of all of the words Justin Trudeau said at his father's funeral, that one phrase stuck with me. On one hand, it is so absolutely arrogant that I wanted to throw the famous finger back at our deceased PM. Oh, it wasn't up to us before? So what you are saying is that before PET died, we were just a bunch of sheep being herded by the nearly divine shepherd. Now the big, bad world is out there and we are without our fearless leader. So rally around boys and girls, we have to suck it up and try to make our way. Puhlease.

On the other hand, in keeping with the interpretation of most of Canada, it is a phrase that really isn't arrogant as much as it signals a major turning point in the spirit and purpose of our country. What you should take home from this speech, this funeral, this national mourning is that what PET really represented was a sense of pride and purpose for the country. He sparked debate. He was decisive. And as such, he was divisive. In the end, the incredible 5 days of mourning caused us all to reflect on what it means to be a Canadian and what it means to think of the individual's rights as a platform for a just society.

I'll get to the technology angle in a minute. This is important stuff.

I actually think the man should be a pariah in some respects. He was not a smart economist. He really did not have his hands on the wheel of the economy. He simply let go of the wheel and let John Turner, his Finance Minister, step on the gas. The result of his bumbling was a mess that will never be repeated by any leader, even Glen Clark. It would take a thousand fast ferries to create the mountain of debt that he created.

Fun PET factoids:

  • Our dollar was worth more than the US dollar in the mid-70's, after the energy crisis started and a few years after the currency traded freely. As an example of what happened to our economy with PET doing crazy things like price controls and National Energy Programs, we have dropped to 66 cents relative to the Americans. This is where we will be stuck for years because of our structural disadvantages brought on by years of bad interventionist government spending and the resulting debt. We need a cheap currency to get our exports out there.

  • The debt started by PET and piled on by Brian "The Chin" has left an entire generation of people under 35 with no real clue as to why their parents were crying last week. We don't remember Trudeaumania. We sub 35s have been crying since we entered the workforce because half our paycheque disappears so that nearly half of that money can pay the interest on the mountain of debt. Sure, the US created tons of debt too. But they fought a Cold War with massive defense budgets. They still managed to kick the Japanese and German economic butts while buried under their debt through greater innovation and worker productivity. Canada, until very recently, stagnated. Result: the sub 35s in the US own houses and pay much less tax. We are still trying to pay our student loans. Hello brain drain.

  • One of PET's favourite tricks was big national crown corporations that competed in the private sector. This was worthy of the BC NDP for stupidity. Air Canada, Petro-Canada and VIA Rail were all government owned, state run operations competing head to head in the market with entrepreneurs. Lovely. If PET were in charge today, we'd have Canadian Networks, a new optical networking company to compete with Nortel, just to keep them honest and playing fair.

I'm only pointing out his tendency to make very, very bad decisions as to what the government should do in an increasingly competitive, global economy. He really sucked at that part of the job. But, despite my growing anger at all of this and how most retrospectives seemed to gloss over these facts, I found myself choked up with a tear in my eye when the nation said good-bye. As the red receded from my vision and the vein in my temple stopped throbbing, I came to another realization. Over the last few years, we have turned a big corner and we are coming on strong. This national gathering of people showed strength and perseverance. It showed that we have weathered a storm and we did it together. With the death of PET, we were looking back at another time in our history when Canada first had a sense of self. The nostalgia for the over 35 crowd was really a longing for that feeling in the late 60's. At the time, we had a new flag, a new anthem, Expo 67 and a fantastic, cool, smart PM that helped put us on the map. Things were very, very good. In an incredible sense of timing (you gotta hand it to him, if he had anything, it was a sense of timing), PET has re-energized a sad sack nation, causing us to all look around and take stock. What we see is actually pretty good. And we should feel good again.

Where are we now? We have done far more with far less in the past few years. We have turned an economy up to eleven on a scale of ten and we are now being recognized as such on the world stage. Have you been listening to the politicians in Ottawa in the past two months? Who flipped the "get it" switch? They are all talking about the right, positive steps to accelerate technology development here in Canada. Paul Martin will make it sound like he always got this new economy thing when he launches the mini-budget next week. Capital gains taxes for only 50% of you gain. Hey, that's pretty good. Another way to look at it is that you are paying roughly 18-20% in taxes on all of your gain. That's very good. Now how would you rather be paid: salary taxed at 45-50% or exercisable options or dividends taxed at 18-20%. In a crappy stock market, you want a blend to be sure, but the incentives are now aligned better for tech workers, especially relative to the US. Heck, even Beaker (I mean, John Manley) is out looking to change our international perception to help Canada promote itself better. Who was it that said that should be the first thing we do to help the tech industry? Who was it that kept screaming about better promotion using proper market research and a focused blitz on key American markets so that we rank ahead of Finland as a sexy tech market? What was his name? It's on the tip of my tongue...

What is PET's legacy? A sense of pride. A sense of who we are. A common goal is what we needed. Climbing out of the hole that PET dug us economically is part of that common goal. The other part is a fierce determination to make it in a capitalistic world while holding on to our principles of rights for the individual (PET's preferred legacy). This mix is what makes us Canadian. We can live and work among sixty or seventy ethnic groups. We can make education and health care a fundamental right. We can be fair, honest and hard-working and yes, polite. And we can still kick ass internationally in business, sports or the arts. This is the path we are on. To be fair PET started us down this road for better and for worse.

We still have lots of work to do. That's why it is up to us now.

Random Thoughts -

- Next Column: A Special Guest - I am unavailable next time around, so I have arranged for a guest columnist to supply you with wit and wisdom. Acerbic is one adjective. Provocative is another. He will be nothing if not entertaining. And he gets to hide behind my picture, so you won't pick him out in a police lineup. Paul Kedrosky writes for the National Post, Wall Street Journal, Industry Standard and CNNFn just to name a few. Enjoy.

- Market Meltdown II - Holy head rush, Batman! I'm getting a little woozy with the churn and burn in the markets these days. I think the sentiment right now is if you have any money left, it is time to buy. Intel has a P/E ratio of 22 today. That's what it had in 1995. This company still makes gobs of money and will grow in new markets. And it compares very favourably with other big tech company P/E ratios, which are still 2 or 3 times higher. Can it and Microsoft and Lucent and the rest possibly go lower? What does this market downturn mean locally? Well, PMC-Sierra lost some serious steam. And everyone else got whacked too. Let me ask you this? Do you strike out on your own and start something new when the stock options aren't worth as much anymore or are you afraid of the uncertainty enough that the salary and job security at the bigger company will keep you there longer. Do you believe that new and exciting companies can be made in the market today? Look around. Are corporations still buying things? Are they still increasing capacity? Has demand dropped or is supply constrained and you can't build the damn things fast enough? I believe that the market downturn is not related to the health of the technology economy as much as it is reactionary to other forces, like oil prices etc. It's still a good time to be looking for customers.

- Shhhhhh. Don't Tell Them - Psssst. I'll let you in on a little secret. Fuel cells using hydrogen are not that much more efficient than IC engines that use gasoline. They just pollute a whole lot less and they can be convenient sources of off-grid electricity. When oil prices go up, the value of the alternative energy sources does not skyrocket like the companies that make fuel cells have recently, Ballard of course being the biggest. You still need energy to make the hydrogen. If there was no oil, then alternative ways to get around would have a lot of value. But if there was no oil (trust me, there is lots of oil still), it would be very expensive to create pure hydrogen, given that one of the main sources of getting the energy to electrolyse water would be gone. They just pollute less and that's why we want them. As long as most people don't understand this, you can play the stock by watching the price of oil.


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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