Say ‘no’ to Amazon North

IF WE WANT TO WIN GLOBALLY, WE HAVE TO COMPETE — NOT FIELD A FARM TEAM.

Iunderstand why the Ontario premier and all the mayors in the Greater Toronto Area want to lure Amazon to set up its second headquarters in Toronto: Amazon would make investments that would benefit our cities. I also get why, so soon after he was elected, Prime Minister Justin Trudeau went to Kitchener for the opening of the new Google building and why, earlier this year, he rushed to Montreal to welcome Facebook’s new artificial intelligence (AI) lab being established there.

On the surface, it looks like a story worth celebrating: American tech big shots think Canada’s got talent! But here’s a spoiler alert: This story won’t have a happy ending. In fact, we’re witnessing the second coming of the branch-plant economy. Instead of swooning when U.S. behemoths come courting, politicians should recognize that they are ensuring the demise of our homegrown tech sector — a sector that is absolutely vital to our future prosperity.

Amazon, Google, Facebook, Microsoft or Apple can and do already tap us as consumers. So why do they want to build in Canada? The answer is simple: AI is going to change everything about the way we live and work and, thanks to decades of publicly-funded research, Canada is a global leader in AI. Funded by our tax dollars, our academic institutions have been quietly producing stellar computer science and engineering graduates, who have been going on to do groundbreaking research in AI. This isn’t news to the American tech giants — they have recruited heavily here for years. By building here, they will be even better positioned to secure the best talent.

Those new recruits, both while they are working in shiny new jobs here in Canada, and when they leave (as the very best inevitably will) to pursue a career path at the multi-nationals’ HQ in the United States, will create enormous intellectual capital and shareholder value — for their U.S.-based employers. Which will create greater prosperity — for Americans. And top up tax coffers — in the U.S.

What do we get? Bragging rights, mostly; the same kind we get when a Canadian actor or singer makes it big in the U.S. But in the long term, Canada will reap only a small percentage of the economic value generated by our homegrown tech talent. It is yet another terrible trade where Canada winds up at the bottom of the value chain.

But there’s a particularly high multiplier effect with tech talent, because it has the potential to create so many jobs and so much wealth. The straight economic bleed from Canada to the United States that is underway in the tech community is already staggering, and it’s still early days. If we stay on this path, the best innovators and leaders — the people we absolutely need if Canada is going to emerge a winner in the fourth industrial revolution — will be shipped over the border like so many barrels of oil. We need to invest all our energy in figuring out how to keep them here, rather than running around unrolling red carpets for the multinationals that want to poach them.

I’m not a protectionist. I understand why U.S. tech giants come to Canada, and as an entrepreneur, techcompany founder and venture capitalist, I welcome them: I believe that all Canadian industries need an open, competitive market in order to spur innovation and technological advances. Rather, I am arguing for enlightened self-interest. If we want to win globally, we have to compete — not field a farm team whose main purpose is to provide talent for the big leagues. We need to believe in ourselves enough to incentivize and invest in early-stage Canadian technology companies so they can scale up and rise to global dominance.

Here’s a radical idea: Recruit our best and brightest to our own growing multinationals! Here’s another: Instead of throwing tax dollars at U.S.-based tech giants, our governments should revamp their procurement policies and start aggressively buying Canadian in order to give the best and most innovative companies — whether tech companies or not — a shot at expansion, so they can compete with American giants. Most importantly, we need our venture capital industry and institutional investors to take meaningful stakes in Canadian startups, so we support Canadian ventures and encourage more Canadians to invest in them. When a Canadian-founded tech startup is majority U.S.owned — as so many of ours are on a trajectory to be — the lion’s share of economic value bleeds out of Canada, regardless of where the company is located.

The ancient Greeks used a Trojan horse to breach the walls of the city of Troy and destroy it. We need to recognize that the tech giants who are coming to Canada are using the same playbook. They are not our saviours — this is a modern Trojanhorse attack on Canada’s future prosperity.