Opinion: Why Canada’s defence spending should follow this Cold War blueprint

Liam Gill is a former startup founder, investor, and lawyer who leads the Capital Program at MaRS Discovery District, where he supports Canadian startups in raising the capital they need to grow and scale.

Last week, the federal government unveiled a $6.6-billion Defence Industrial Strategy that will play a key part in its push to rebuild the Canadian Armed Forces (CAF) and the country’s sovereign defence capabilities. As Canada ramps up defence spending, the country must look to American spending during the Cold War as its blueprint. The goal should not just be to fund technologies that improve the military’s operational readiness, but to fund foundational technologies, such as AI and clean energy systems, that will underpin the next generation of the consumer economy.

The power of countries like China and the US comes not just from their militaries or economies, but from the world’s reliance on their tech stacks.
Liam Gill,
MaRS Discovery District

This approach shifts the definition of national security. Today, owning foundational technology is a defence strategy. We have long recognized a secure oil supply as necessary for national security; the United States recently initiated another global conflict to secure its oil pipeline. Sovereign foundational technology is as important as oil. The power of countries like China and the US comes not just from their militaries or economies, but from the world’s reliance on their tech stacks. Spending billions on traditional defence without prioritizing investments in domestic AI and clean energy capacity is a strategic failure.

History proves that defence spending is the most potent industrial policy a nation can deploy. In 1961, the majority of computer semiconductor chips produced in America were purchased by the US government to support the Apollo program. Over the next few years, the government remained the top buyer, providing the critical capital needed for companies like Fairchild Semiconductor to survive and innovate. The US government purchased frequency synthesizers for deep-space exploration from Hewlett-Packard (HP) and funded high-risk research, such as the Gravity Probe B at Stanford University.

These investments did more than put a man on the moon and help to win the Cold War, they laid the foundation for America’s technological dominance. A group of executives left Fairchild to form Intel, which, along with HP and Stanford, formed the bedrock of Silicon Valley. To this day, roughly 78 percent of all laptops use Intel processors, direct successors to the chips created for the Apollo mission. If you are reading this on a laptop, you are benefiting from a Cold War investment made six decades ago.

Canada has long needed this type of spark in our innovation ecosystem. For the country’s new defence spending to have a comparable impact, it must be ruthlessly targeted, not just at technologies that fit the traditional definition of dual use—both improving military operational readiness and having civilian applications—but at foundational technologies that all Canadians, including military and government officials, use on a daily basis.

Consider Chemshift Technologies, a Calgary-based startup using a proprietary process to refine lithium. Canada ships more than 60 percent of our raw lithium to China for refining. Chemshift’s process allows this refining to be done domestically. This lithium can be used by the military for batteries in unmanned vehicles or to power essential gear. It is also used daily by civilians in their phones, laptops, and electric cars. While this technology might not fit the traditional definition of dual use, by backing the technology, the government secures a domestic supply chain for critical energy needs, while simultaneously breaking our dependence on foreign competitors.

Cohere is another example. Canada’s horse in the large language model (LLM) race is reportedly planning an IPO. Given its current cap table, with Canadians owning just over 50 percent of the company, it is unlikely Cohere will be entirely owned and controlled by Canadians following its next funding round. With 90 percent of its revenues coming from outside Canada, its ties to the country are quickly diminishing. By taking an equity position in Cohere, the Canadian government can ensure that we have a sovereign LLM owned by Canadians, accountable to the Canadian government. While there is limited direct operational benefit to owning a sovereign LLM, it does guarantee that, as we move towards an AI-native society, our armed forces, businesses, and citizens won’t be at the mercy of foreign technology companies.

A technology stack free of foreign influence is the most vital aspect of our national security.
Liam Gill,
MaRS Discovery District

Canada has committed to spending five percent of its GDP on defence by 2035. For this investment to truly protect Canadians’ future, it cannot focus primarily on operational readiness for the armed forces. Instead, it must recognize that, in today’s world, a technology stack free of foreign influence is the most vital aspect of our national security. The US won the Cold War not just by sending a man to the moon, but by investing in technologies that were foundational for the next generation of the consumer economy—providing the seed capital for an innovation ecosystem that is still unmatched.

Canada has a generational opportunity to build a sovereign technology stack and seed our own innovation ecosystem. If we get this right, defence spending will be the catalyst that delivers life-improving products, creates generational wealth, and secures our sovereignty. If we get it wrong, we will remain defenceless in a world run by foreign companies and governments.

The opinions and analysis expressed in the above article are those of its author, and do not necessarily reflect the position of BetaKit or its editorial staff. It has been edited for clarity, length, and style.

Feature image courtesy Mark Carney on LinkedIn.