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Matt Spoke: Canada needs less ‘innovation theatre’ and more productive growth

Commentary

Canada doesn’t need more startups.

Bear with me for a minute. After all, I’m a startup founder in Canada. I’ve raised tens of millions of dollars building two companies and have employed over 100 people during that time. 

But like most tech startup founders, I didn’t set out to build a startup. The goal is bigger, more aspirational, and ultimately what our policies should be working to incentivize. 

I’m building a company that aspires to change the world in a small or big way. To do that, my company can’t stay a startup for long. In fact, what I’m ultimately building is a massive company. It just so happens that “startup” is step one. 

The statistics suggest that I’ll likely fail. But the fact that I’m trying—alongside so many others like me —means some of us will succeed.

From the perspective of policy focused on encouraging innovation and economic growth, the purpose of this process needs to be to change the odds so that we as a country create more winners and fewer losers, as compared to our competition (the U.S., China, Europe, wherever).

“Startups”, as we’ve come to call them, have become a little bit of a romanticized notion in Ottawa. Politicians love the imagery of 20-something-year-olds in hoodies crowding into government-subsidized incubators to build startups. The problem is that we’ve created a policy environment that incentivizes what you might call “innovation theatre”.

The goal is not measured in the number of companies that go on to dominate their markets globally. It’s not measured in impact on GDP growth. It’s not even measured in employment. It’s measured in optics. 

How many entrepreneurs have been supported through the laundry list of government funding programs? How diversely do they represent Canada’s regions? What demographic do they fall into? 

In optimizing for these vanity metrics, we’ve fallen behind other countries in our ability to create world-changing businesses, started by world-leading Canadian entrepreneurs. 

“Startups” are NOT small businesses.

There is a missing distinction that politicians too often don’t understand. Every political party spends a disproportionate amount of time and energy focused on what they broadly call “small businesses”. 

And although I don’t like the way we often use the term in Canada, startups are NOT small businesses. They are huge businesses finding their footing in a new market, optimizing their odds of winning, and ultimately growing to be big drivers of wealth and productivity. 

The unpopular reality that Robert Atkinson does a good job describing in his recent Dialogue with The Hub is that small businesses generally slow down productivity. In fact, the bigger a business is (all else being equal), the more productive it necessarily is. It earns higher margins, pays better wages, contributes more in taxes, captures more market share, and innovates.

Until we understand that distinction, we will continue to primarily prioritize policies that encourage more small businesses, more startup theatre, and fewer global winners.

As any entrepreneur would likely agree, we’re not sitting on the sidelines waiting for our government to figure out the right policies to help us win. But as with any economic policy, we are influenced in our decisions by the things that are permitted, encouraged, and celebrated, as well as those that are restricted, discouraged, and frowned upon. 

In some cases, despite bad policies, a Shopify will spring up from Canada and go on to create a market and win. And today, Shopify is the most valuable company in Canada, and one of the largest contributors to our national productivity and economic growth. 

There is no government program that led to its success, nor any that could have stopped such a world-class team from building what they built.

But what we can and should expect from our government is a recognition of the importance of new innovative companies that start off as startups, but ultimately aspire to become massive, successful companies. 

We should assume that our most valuable companies in 10 years will not be the same brands that hold those titles today. The question then becomes how do we make that true.

Joe Varner: Canada must stand up for democracy and stand by Taiwan

Commentary

Rudyard Griffiths’ interview with Chinese scholar Professor Zhang Weiwei, the Dean of the China Institute at Fudan University, is another insight into how Beijing views the world, and just how dangerous the situation is between a growing superpower in China and its neighbours, particularly Taiwan.

In the interview, Zhang said, “The Chinese foreign minister talked with his counterpart in the United States, Secretary of State Blinken, where he basically drew three red lines. One is state sovereignty, which cannot be encroached upon. That has to do with Taiwan, Tibet, Xinjiang, and Chinese islands in the South China Sea, etc. The other is that China’s political system cannot be challenged.” 

Within a day of The Hub’s interview, China’s outspoken ambassador to Canada Cong Peiwu warned that Beijing wanted good relations with Canada, but “People have to understand the real status quo in the Taiwan Strait. The status quo in real terms is that there is one China in the world, of which Taiwan is an inalienable part.” Sadly, these sentiments are not new. In July 2019 China published its latest defence white paper, National Defense in the New Era, outlining its strategic guidance for the People’s Liberation Army (PLA) in what China termed a “new era.”  In the document, China used unprecedented language not seen in previous defence white papers, warning Taiwan and the world that:

“China has the firm resolve and the ability to safeguard national sovereignty and territorial integrity and will never allow the secession of any part of its territory by anyone, any organization, or any political party by any means at any time. We make no promise to renounce the use of force and reserve the option of taking all necessary measures.” 

 In January of 2021, President Xi ordered that the PLA move to “full-time combat readiness” and that it must be ready to “act at any second.” China’s air incursion against Taiwan last week included 27 warplanes, including early warning, electronic warfare, strategic nuclear-capable bombers, refueling aircraft, and fighter planes. This represents the first time an airborne tanker was deployed to Taiwan’s air defense zone of ADIZ. Like India in the Himalayas and Japan in the Senkaku Islands, Beijing tests Taiwan’s democracy every day in some manner, probing for weakness and looking for a moment to strike. 

Beijing tests Taiwan’s democracy every day.

Beijing considers Taiwan a renegade province, and many democratic countries with multi-lateral or bilateral defense ties within the Indo-Pacific region have been forced to pay lip service to a “One China Policy”. But there remains the uncomfortable truth that Taiwan is a thriving democracy and has little in common interest with the mainland. Taiwanese public opinion is geared toward the status quo, but it will fight rather than succumb to Chinese military force. Some 77 percent of Taiwanese favour independence under peaceful conditions, and some 60 percent of Taiwanese support independence in the face of a Chinese attack. 

If there is to be reunification between Taiwan and China, it will be through force of arms. That should be a concern to any democracy, including Canada. This is a potential conflict with broader implications—it is important to note that Taiwanese security is linked to Japanese security, and Japan is vital to the U.S. national interest in the Indo-Pacific. 

At present, a Chinese move to invade Taiwan would be fraught with challenges. Specifically, the number of troops needed to seize the island in offensive operations should the Taiwanese choose to fight, not to mention the logistic challenges of getting those forces to Taiwan and keeping them there. But that will change in President Xi’s favor in the next three to five years, and Taiwan without outside assistance will be vulnerable to invasion.

Beijing could without too much trouble seize Taiwan’s offshore island possessions, such as the strategic Pratas Island, and it could attempt to blockade Taiwan until the government gives in or Western naval intervention saves the day. China could employ missile drills to shut down the shipping routes to Taiwanese ports or attempt to subdue the island without landing forces (though they would still be needed at some point to bring about victory).

Beijing has several hybrid warfare options at its disposal, including assassination, economic warfare, cyber-attack, and subverting Taiwanese elections to empower a Chinese political ally who would then simply hand over the government. Although unlikely, China could deploy nuclear weapons to Taiwanese ports on commercial ships and use them to hold the island state hostage or employ them for an electromagnetic pulse attack. It could even carry out nuclear strikes on Taipei or other Taiwanese cities in an all-out war, but that is an unlikely and worst-case scenario. In real terms, Taiwan is in big trouble without Western military, pollical, and economic support. 

Canada has a role to play in U.S.-led moves to contain China and to protect those allied states under threat in the region. We have both economic and strategic military interests at stake in the Indo-Pacific, and they do not rest with a hegemonic Beijing. Do we as Canadians really want to align our interests with a country that takes our citizens hostage, bullies its neighbours, is a genocidal police state that imprisons millions of its own Turkic peoples, and disappears its democratic activists and even its athletes ahead of the Olympics.

Sitting on our hands waiting for a Chinese invasion of Taiwan to take place ensures Taipei’s ultimate defeat. A hungry China will then turn its attention to Japan and Australia. Canada and other Western democracies need to engage now before Taiwan and the rest of us are on the receiving end of a Chinese fait acompli

Canada needs the political will to stand tall against Beijing.

It is high time for Canada to consider military options to help deter war between China and Taiwan and our traditional military allies in the region. China is not turning back from its plan to reunify the island state with the mainland absent outside intervention. Canada no longer has the luxury of sitting on the fence. Beijing has made it crystal clear that you are either with them or against them, there is no middle ground.

Canada may be a small factor in this fight, but in coordinating with allies—Taiwan, the U.S., Japan, South Korea, and India—Canada could help to deter the Chinese attack on Taiwan. Freedom of Navigation Operations with deployed Canadian warships sailing through the Taiwan Straits demonstrates to China that Taiwan is free and that we want to keep it that way. Canada could provide training to Taiwanese special forces and military leaders at Canada’s military educational institutions. 

Finally, as China ratchets up tensions we could, as Canada has done before in the Baltic States, send land, air, and sea tripwire forces to the region. Here Canada could provide Taiwan and the U.S. with a small but powerful deterrent in forward deploying stealth vessels to the area around Tawain, namely our Victoria class diesel-electric patrol submarines.

More than anything, though, Canada needs the political will to stand tall against Beijing and send a clear message to the Chinese Communist Party that we stand for the rule of law, democracy, and a peaceful and stable Indo-Pacific. Some good places to start would be to push for Taipei’s membership in WHO, ban Huawei from our 5G telecommunications system, and consider a boycott of the Beijing Olympics. Military force is not the only way to deter China and get President Xi’s attention.