This is the next entry in our “Best of” series, in which we venture deep into the vault to replay blog opinion and insight that has withstood the test of time. Today’s post hails from December 2011. We welcome your feedback.
More than two decades ago, I was working with a public relations agency in Halifax, Nova Scotia, that was helping a resource development company counter considerable opposition within fishing communities to its proposal to drill exploratory natural gas wells on Georges Bank. It was a classic case of a clash between a critically important but fading industry — the fishery — and a new and incredibly promising industry — offshore hydrocarbon extraction. We mounted an open and consultative information campaign in the fishing communities most dependent on Georges Bank. We held countless meetings in and around those communities. We hired a local lad, the son of a fishing family, who had become a geologist and had worked in oil and gas exploration to head up our community efforts. And we organised a critical political gathering — a dinner in Halifax to which we invited scores of influential business, political and community leaders to hear directly from the company CEO.
I wasn’t at the dinner but my colleagues told me what happened and I am paraphrasing in the quotes below.
The CEO, almost a caricature of the good old boy cigar-chomping American oilman, got to his feet after desert and, as part of his prepared comments, told the assembled dignitaries, “The problem with you’all is you don’t know how to take risk.”
The CEO of one of the world’s largest fish-processing companies was in the audience and he rose angrily to his feet. “My people have been going to sea for six generations, putting their lives on the line in small boats on the North Atlantic to harvest this resource,” he practically sputtered. “Don’t you dare tell me we don’t know how to take risks.” He stormed out of the room, taking with him a good chunk of the crowd and pretty much any chance our client now had of winning political support for its plans. (The federal and Nova Scotia governments shortly thereafter declared a 25-year moratorium on hydrocarbon exploration on Georges Bank and last year, they extended the ban for a further three years “to allow for more study.”)
I am always reminded of this story when I hear people in the technology sector and elsewhere in the Canadian economy repeat this shibboleth that Canadians don’t know how to take risks. In Deloitte’s recent report on productivity in Canada, ”business leader risk aversion” was cited as one of “six key issues that are having a significant impact on productivity.” The report said that Canadian and American executives “self-report levels of risk tolerance that are very similar” but that there is still an “action gap” that leaves Canadian business leaders less likely to invest in “activities that are required to improve productivity.”
I’m not sure I’m buying the cause-and-effect connection Deloitte is seeing here.
For as long as the Canadian dollar wallowed near the bottom of the global currency-exchange tables, it simply cost Canadian companies a great deal more than their international competitors to buy new machinery, invest in new processes, acquire new technology or recruit world-class talent. Now that our currency is on a resource-driven tear that has slashed the margins of export-oriented companies, the cash for such investments can only be far more difficult to find.
More critically, though, there are structural issues that go to the heart of the risk-reward calculation at play here. One area of Canada’s economy where we clearly have managed to get those structures right is in resource exploration and extraction. There can be no riskier venture than drilling a well or digging a hole in the ground in the hope that profitable quantities of a resource will be found. Our tax and investment structures in this sector have been so well optimised over the years that Canada is a world leader in the raising of capital to finance this most-risky of economic activity. And global mining and energy exploration companies flock to our public markets to raise the risk capital they need to go find and exploit new deposits. Imagine if investments in technology startups could enjoy the same highly tax-efficient status as the flow-through share structure at the heart of much of Canada’s burgeoning resource sector.
So don’t you dare tell me Canadians don’t know how to take risks.
Fortunately, this is not a universal mindset. I was surprised and delighted last month when I heard Google Canada managing director Chris O’Neill speak at AccelerateTO, a day-long mini-conference bringing together technology entrepreneurs and investors. Like me, O’Neill looks at the resource sector and says it is “bullshit” that Canadians are risk averse. What we do lack, he said and I agree, is a culture that both instills entrepreneurial values and publicly rewards them. “We need to embrace entrepreneurship (in Canada) like we do hockey,” O’Neill said. Like hockey, a new national obsession needs to cover everything from the minor leagues — school programs that teach kids that entrepreneurship is a career path — all the way up to the professional levels where entrepreneurial leaders and heroes are celebrated.
A new Canadian charity is in the process of being formed that will tackle a lot of this culture-building challenge. I’m hugely impressed by the energy, dynamism and vision of Victoria Lennox and her ambitious plans for Startup Canada, and I’ve agreed to help where I can as Startup Canada seeks to “celebrate, inspire and accelerate” entrepreneurship in Canada. I’ll be writing more about this over the next weeks and months.