This weekend, while celebrating Canada Day with family and friends, and in the midst of a constant stream of news about a growing trade war with the US, I had a chance to reflect on the future of this country and our economy.
Canada’s economy is the 10th largest in the world, of which a massive 70.7 percent comes from services. We are unusual among developed countries in that some of our largest industries are oil and forestry, natural—and finite—resources that contribute huge amounts to Canada’s economy. Canada has the world’s third-largest proven petroleum reserves and is the fourth largest exporter of petroleum. We are also the fourth largest exporter of natural gas.
While the oil industry helped propel Canada to the top 10 in the world, the good times won’t last forever. Why? This price history of solar cells says it all: since the 1970s the per-watt cost of solar energy has fallen from more than $76 to less than 74 cents.
The genie is already out of the bottle. Renewable energy will create a dramatic shift in demand for oil and gas. In the next decade, the energy sector will see more change than it has in the past century.
The solution is not to prevent foreign companies from setting up shops here.
Canada also has a sizable manufacturing sector, particularly in the automobile industry. However, more often than not, Canadian plants are merely branches to foreign companies. Unfortunately, Canada has no ownership in the brands and the intellectual properties that are very valuable and have lasting value.
Entertainment is another major sector for Canada, employing hundreds of thousands of people and representing close to 2.8 percent of our GDP. While many Hollywood TV and movies projects are produced in Canada, we capture few of the upsides; even if a locally-produced project is a mega-hit, we’re still providing a service to the Hollywood studios. Studios based in Los Angeles can easily choose to make their next movie somewhere else if Canadian locations aren’t price-competitive. Unlike Hollywood, Canada’s rich and creative entertainment industry heavily relies on government subsidies and remains transactional.
Energy and entertainment create many jobs in Canada, but we all know that industries can turn on a dime. Case in point: the ongoing trade war with the US. Canada can’t solely rely on oil and providing services to foreign companies to sustain our growth in the future.
Canada’s economy needs a second act. Fast.
The good news is that we have all the raw material to pull it off. How? Canada has already emerged as one of the world’s leaders in artificial intelligence and blockchain. Ethereum-one of the most important blockchain-based technologies-was born in Toronto. As such, the city has a disproportionate number of blockchain experts. AI and blockchain are two great examples of why Canada is leading the pack in the new data-driven economies. At the moment, the top 10 most valuable companies in the world are data-driven tech companies. This includes the likes of Amazon, Apple, Microsoft, Tencent, Alibaba, Alphabet and Facebook. Data is clearly the new oil.
What Canada really needs is an environment where many—not just one or two—domestic world-class tech giants can emerge.
With a thriving tech ecosystem and abundance of experts in leading fields like AI and blockchain, Canada has the potential to create the next generation of tech giants.
Canada’s leadership has led to many foreign companies to set up their AI research labs here. But you’d be right to point out that this just recycles a problematic model, in which foreign companies control these important jobs and retain intellectual properties generated by publicly funded research.
These are valid concerns. At the same time, we see a virtuous cycle emerge from this situation, in which (often) foreign companies help attract and retaining talent in Canada, benefiting the country in the long term. That said, if all of the new jobs created by these data-driven companies are all foreign-owned, it will be a missed opportunity for Canada. We’ll be reproducing what we now see in the auto and the entertainment industries. Canada could have created a Ford or a Warner Brothers decades ago.
The solution is not to prevent foreign companies from setting up shops here. Tariffs and walls are not the solutions. Just look at the Valley. Many foreign companies open up branch offices there, but the domestic firms are all thriving at the same time. If Canada produces many billion dollar companies, who cares if Amazon opens up an office here or not?
What Canada really needs is an environment where many—not just one or two—domestic world-class tech giants can emerge. The kind of companies that make a lasting impact on the Canadian economy. Fortunately, the seed has been sowed. For the first time, the environment has been created for domestic data-driven tech firms to thrive and succeed. I know because I’m the CEO & co-founder of Wattpad, one such company. In Canada’s technology sector, the wind is at our back. It is up to us to pull this off.
I am absolutely grateful for the opportunity to lead one of the rocket ships that is helping Canada pull off its second act.