THE CB INTERVIEW: JIM BALSILLIE
The business legend on why Canada is doing innovation wrong —and how to fix it
The legendary business leader on how Canada can build a truly innovative economy
Q The word “innovation” is used in so many contexts that it has almost lost all meaning. When you talk about creating an innovation economy, what are you referring to?
Innovation is a very specific thing: the commercialization of ideas across all industries and sectors. It’s a technical, specific, agreed upon economic definition. And we’ve had so much punditry and posturing by people in this country that they’ve taken what is a very specific, technical and surgical concept and made it broad and general. We’ve had catastrophic confusion about innovation for other things. For instance, science and technology is what universities do. That’s invention. Innovation is getting money for ideas. When we confuse those buckets, innovation gets diluted. And we wonder why Canada has had zero growth outputs in innovation over the past 30 years.
Q Why has there been confusion?
Canada has a policy community that has not updated its thinking for the 21st century. That is the root problem. Canada has the most superficial discourse on innovation I’ve seen, having done business in some 35 countries. We’re stuck with 19th- and 20th-century economic policies for prosperity, and we use policies for traditional economies and inaccurately jumble them with innovation. Traditional industries, like resources, agriculture and manufacturing, compete on a cost basis. The government’s job is to create infrastructure and really get out of the way and allow the movement of
free trade. Innovation economies function in the opposite fashion of free trade. They’re absolutely, diametrically opposed.
Q How so?
Intellectual property [IP] works on a principle of restricted rights or constraints—essentially, government-granted monopolies. The government makes the market for ideas and IP. It’s the exact opposite of free trade and of the traditional economy. You only have a market if the government’s there. And you only have a market that advances prosperity if CEOs and the policy community are talking. You need to understand that we’re decades late in this approach. This is how I saw innovation economies work around the world, and we don’t teach it. You cannot craft policies in a sophisticated fashion if you don’t understand how the game is played. It’s like playing chess and not understanding how the pieces move.
Q Can you give an example to show how the game is played?
Sure. In the United States, there are 1,100 standards for silicon. Now each standard embodies IP. If your IP is picked as a standard, you have a lottery ticket. Your competitors have to pay you. Well, Canada has not really participated in these forums, that I know of, in the past 10 years. And you may have noticed, Canada’s participation in the silicon industry has collapsed. That’s a case where standards or regulations can turn a market on or off. Or take Desire2Learn, which has very, very good education software, and they’ve got unique and proprietary technology for those with learning disabilities. What if the Ontario government set a standard that all online vendors had to have this technology for the disabled? That would expand D2L’s freedom to operate and restrict their competitors’. It advances a Canadian company and a social equity. Sounds like a smart, strategic standard to me.
Q You’d get some people complaining that it’s unfair and anticompetitive.
Yes, and the people who say that are the keepers of the 19th- and 20th-century orthodoxies. When RIM was part of the Rockstar Consortium to buy Nortel’s patents, there were three o’clock in the morning phone calls to the U.S. Department of Justice, which was setting the rules for how the buyer had to avail those patents to the rest of the market. The U.S. is working hands-on, triple time. What do you think Tim Cook is talking about when sitting beside Michelle Obama at the State of the Union address? That’s not hands-off.
Q If commercialization is the problem in Canada, then that presumes there’s an abundance of unique, original ideas here, right?
We’re world-class in ideas. We invented the Internet search engine. That was OpenText. The University of Toronto invented the touch screen. We have invented lots of great stuff. And that shows in science and technology— we get lots of peer-cited stuff.
Q You said earlier that we’re decades behind other countries. So why isn’t the situation hopeless?
There’s tremendous reason for optimism. First, Canada has tremendous entrepreneurs. Those I’ve encountered are incredibly smart, hard-working, and globally oriented. The agent of innovation is an entrepreneur, with a company and a product. So if you have that, that’s the first basis of optimism. The second is I’ve found a handful of senior civil servants in Ottawa and Queen’s Park who are very open-minded about updating policies. The third is that both of these communities are ready to meet each other and start to figure this out.
Q What has to change first?
The most important thing is education. We have not updated our policy thinking since the 1980s. It’s the same discourse. This includes entrepreneurs, policymakers, the business community and educators. Getting money for ideas and managing restriction systems is a very precise, technical and surgical exercise. And we don’t teach it. We’ve had a bunch of failed policies and outcomes. When they didn’t work, the narrative of the policy community—unsubstantiated by any facts— was to say Canadians have a lack of fire in the belly. We’re not outward looking. Too complacent. They say all this stuff and they make it up, because their orthodoxy didn’t work out. If you don’t teach CEOs how the game is played, if you don’t mentor them, if you don’t have an ecosystem that supports the game, how do you expect anybody to scale? When you tell your entrepreneurs that it’s a hands-off, free market out there, you’re sending them to a gunfight with a knife.
Q You’ve been quite vocal in your criticism of the Trans-Pacific Partnership, or TPP, saying it benefits countries that already play the standards and regulations game. Canada hasn’t ratified it yet. What’s your read on whether that will happen?
It’s become political football during the U.S. election season. I don’t know what’s going to happen any better than anyone else. But TPP is not a free-trade deal. The free-trade gains from TPP are a rounding error. Barack Obama has said publicly that TPP is about writing the rules for the 21stcentury economy. It’s about controlling the rules of the restriction systems in a way that helps those companies that have large, pre-existing IP positions. Canada has only one of those companies, which I built, called RIM. I’m simply saying TPP makes it much harder for a smaller emerging company to break into the club.
Q You said in a talk to entrepreneurs in August that TPP will make it “impossible” for them to scale globally. Is it truly that definitive?
Without a doubt. There will never be another company like RIM in Canada because we’ll have locked in a rule system that makes it much, much harder for new players to emerge.
Q Until a year ago, you were keeping somewhat of a low profile. Was there a moment you decided to take this on?
I was at a conference for technology CEOs a couple of years ago, and a former head of Canada’s civil service said the government has done all of the policies right, and now it’s time for the business community to step up. I had had more than one interaction trying to explain to that community that, “No, no, no, you’ve got to understand that it’s different now.” The orthodoxy was so set in. When he said that, I thought, These guys are just driving these poor entrepreneurs over the cliff. It was my Martin Luther moment.