One of the weirdest thing about Canadian tech policy (insofar as we have one) is the obsession with Canadian “champions”.   Whenever a promising company – say Verafin, or Element AI – gets sold to a foreign (mainly American) buyer, there is always much wailing and gnashing of teeth about Canada being “unable to compete”.    The idea seems to be that unless we have big behemoth players striding the globe, we are not a serious tech country.  It’s not entirely clear why competitiveness should be associated with the presence of a tech behemoth: Israel is widely considered to have a pretty healthy tech economy, but it would be a rare person who could name a single Israeli tech company, despite a couple of dozen of them being NASDAQ-listed. Nevertheless, the obsession with bigness persists, and a significant amount of political attention-space (if not actual policy) seems consumed with the need to make companies big.

There are a few possible points one could make here.  The obvious one is that Canada does have a tech champion with a $150 billion market cap, namely Shopify.  This is a company that sits uneasily with the prevailing logic in Ottawa, which holds that the road to champion status includes government programs (IRAP, superclusters, etc) and oodles of patent protection, because Shopify rose to its present position with neither (afaik Shopify does not own a single patent – more on that tomorrow). 

But perhaps a better question is: do tech champions actually improve a country’s competitiveness and do they create a wider effect on our domestic firms’ capacity to absorb and use technology?  To answer this question, I’d like to use an analogy from marine biology: the whale.

The whale is certainly an impressive creature.  They eat prodigious quantities of ocean plant life, and no one screws around with them aside from other whales.  Whales are pretty cool – if you’re a whale.  But what value does a whale bring to the rest of the ecosystem?  In life, it’s pretty simple: it acts as a nutrient pump: it eats stuff at the bottom of the ocean then returns those nutrients to the surface via whale pool.  These get eaten by creatures which eventually die, fall to the bottom of the ocean, starting the cycle again. It’s an important cycle but not really a growth-cycle.

In fact, whales’ biggest contribution to the eco-system occurs not when they live but when they die.  When that happens, they fall to the bottom of the ocean and serve as an enormous buffet for dozens of other species (this process is known as “whale fall”).  This is pretty close to what we see with tech champions.  Think back to when RIM imploded nearly a decade ago (the company survived under its old name “Blackberry,” but it shed two-thirds of its employees between 2011 and 2015).  Some saw disaster: “omg no more whale for southern Ontario!”.  But really what happened was that a whole lot of very talented and experienced engineers and managers suddenly were cheaply available to other companies.  People who knew how to solve real production problems, people who could navigate global supply chains, people who could manage growth. Local start-ups never could have dreamed of accessing such talents while RIM was around.  So, when RIM collapsed, it was like so many sea creatures at a whale fall.  A feast for the little folks.  The Kitchener-Waterloo efflorescence of the past seven years or so happened because the whale died.  

My point here isn’t that government should go all Ahab and start killing the biggest tech champions they can find.  Rather, it is that what matters in terms of growing an industry is the health of the overall eco-system, not the size of the creature at the apex.  This is much harder to do, but it needs to be emphasized. 

Among other things, what is needed is: i) more competition, especially in the telecom and farm sectors, ii) more pro-innovation procurement policies, especially in the health sector, iii) genuine inquiry into and creative thinking about how to encourage knowledge-spill-overs from the research sector into communities, particularly outside the major population centres, and iv) more thought about how to break through the barriers for scaling-up (which seems to be partly an issue of financing and partly an issue of management training, to which Canadian universities should be paying a heck of a lot more attention). 

The point here is that the ideal conditions for rapid tech growth is not Kitchener-Waterloo circa 2010 with its huge ferocious white whale; it is actually Kitchener-Waterloo circa 2015 with its one big (mostly) dead whale.  Free talent in abundance coupled with small companies hungry to compete globally is what makes economies thrive: truly ambitious governments need to keep their eyes on that prize.