530. Failure or Success in the Time of Trump ｜ Jim Balsillie
Summary
Jim Balsley was the co-CEO of Research in Motion, the inventors of the Blackberry. He was responsible for transitioning the entire world into the smartphone age, and was spectacularly successful as a businessman and an innovator. He resigned from RIM a good while ago, and has been equally successful as an entrepreneur and innovator since then.
Transcript
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President Trump has proclaimed that my country should become the 51st state.
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We have brilliant innovators. We have brilliant researchers.
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What did we do wrong? What did we misunderstand?
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So the number three AI research center in the world is in Edmonton.
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We gave essentially all that away to other U.S. tech companies.
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I think Trump has made a strategic mistake because America's got an unbelievable deal from Canada.
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You know, we actually have the opportunity to make this country roar if we choose wisely.
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This is a podcast that you might think of as primarily for Canadians,
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but it's really for anybody who's trying to understand the world where Trump looms large.
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It's been a particularity of the last 10 years that Canadian politics has become interesting internationally,
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not least because the things that are happening everywhere in the West affect everywhere else in the West.
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Now, Canada is in a particularly strange position at the moment because President Trump has,
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first of all, proclaimed that my country should become the 51st state
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and also lambasted us with some very heavy-duty economic measures in the form of tariffs.
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And this has really put the cat among the canaries in Canada.
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And so the timing of this interview with my guest today could hardly be better.
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And Jim was co-CEO of Research in Motion, the inventors of the BlackBerry.
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And so Jim is responsible, for better or worse, for transitioning, that terrible word,
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And he was spectacularly successful as a businessman and an innovator and a Canadian businessman and innovator.
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But I've known Jim for 15 years and he resigned from BlackBerry a good while ago.
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And he's been equally successful as an entrepreneur and innovator since then.
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So it wasn't a one-shot wonder, large as that wonder was.
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Jim is one of the most reliable and good-natured and yet incisive and critically-minded thinkers that I've met.
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Very well-connected, very competent, a very good man, all things considered.
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And I'm not saying that lightly, given the importance of this discussion.
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I wanted to find someone I could bring to Canadians to discuss the perilous situation that we find ourselves in.
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And so we started the conversation, really, with an analysis of Canada's economic performance,
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which, to put it mildly, over the last 30 years, has not been good.
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We rank at the bottom of the pack with regards to the developed nations.
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And we're now making 60 cents for every dollar that the Americans make in terms of our production.
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And the prognosis by financial analysts is that we'll continue that downhill trend for the next 40 years.
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And we face terribly high housing prices and a future that looks increasingly unstable and narrow,
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So I spent time with Jim analyzing why that's the case.
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And part of the reason is that we brought a resource and classic production economy mentality to the realities of the last 30 years.
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And the rules of the new world are not the same as the rules of the old world.
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And we're not playing well in that new set of rules, first of all, partly because we're not actually helping formulate the rules to our benefit.
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And so we talked about the shortcomings of a purely free market, hands-off, libertarian approach to the new economy.
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And then we talked about Trump and what he's up to and why, what he's maneuvering towards,
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and why we set ourself up to be susceptible to that.
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And then we talked, and this is equally relevant, about the leadership options that Canada faces,
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which are very much akin to the leadership options faced by voters all around the world.
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On the one hand, the Liberal Party in Canada that's currently ruling and generally does in Canada,
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headed until recently by Justin Trudeau, has now had a replacement of leadership.
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He used to be the governor of the Bank of England, as well as the Bank of Canada.
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Appears on the surface to be a highly credible individual.
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And we assessed Carney's ideas, as put forward in his book, Values, for better or worse.
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If you like Trudeau and everything that's transpired under him, you're going to love Carney,
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And so, well, you can evaluate for yourself as a consequence of this discussion,
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if you're a Canadian or anyone else who has to deal with Canada, whether or not that's a good idea.
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We talked about Pierre Polyev, who leads the Conservatives and the positive signs within his budding administration of a, of what?
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There's evidence accruing that he's beginning to grapple with the complexities of the new digital age
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and provides a real alternative, a beckoning alternative, we hope, for Canadians perplexed by the new world and their position in it.
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And it's a very important podcast, at minimum for Canadians, but also for anyone who wants to understand the realities of the new world order.
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So, a lot has changed, well, in the world in recent years, but a lot for the world in Canada since Mr. Trump was elected.
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And he's been rampaging around, for better or worse, like a bull in the China shop, and a fair bit of that has come Canada's way.
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And so, I've been thinking through that from a variety of angles and for a variety of reasons.
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And one of the things I wanted to do was to reach out to the people I know who have a clue and invite them to discuss with me what the current situation is.
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And I don't know anyone in Canada who's best situated to do that than Jim Balsley, a man I've known for about 15 years.
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We've worked on a variety of projects together, got to know each other, and that's been a real privilege.
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And so, first thing I thought I might do for all of you desperate Canadians who are watching with your mouths opened exactly what's happening to your country is to grill Jim a little bit about his background,
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or ask him politely even about his background, so that you understand why I'm talking to him and why it might be useful to follow along with the conversation and learn along with me.
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Yeah, so you want to tell us a little bit about that, but put that in a broader context.
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Like, you've had a lot of experience on the economic side, business side, political side in Canada, but also in the United States and internationally.
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And so, and you've chosen to stay in Canada, and you're a staunch patriot for reasons that we'll go into, but you also understand, and I think uniquely, what Canada faces and how that's come about.
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So, well, I think we should start by talking about your experience first.
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You were also my wife's professor 25 years ago when there were nine students in your class.
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There were nine very good students, by the way.
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I mean, first of all, I believe capitalism is, in a liberal democracy, is the best form for human flourishing in the world.
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And I'm an ardent fan of capitalism, entrepreneurship, technology, innovation.
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And that created the framework for me to be partners with Mike Lazaridis as co-CEOs to create BlackBerry, something we took that really globalized the smartphone, grew it from an idea to $20 billion in over 150 countries around the world.
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And I very quickly learned and had very good mentors in the United States that the way I'd been explained how the economy works is very, very different than the way it works in the ground.
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And so, that's what shaped my experience at RIM.
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I retired at the end of 2011 when we had $5.2 billion in revenue on a $20 billion year and moved on to other things.
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Well, and in all sorts of other realms since then as well.
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So, it's not like your involvement on the economic side practically or conceptually ended when you retired.
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And so, I've been watching that over the last 15 years too.
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You have developed expertise in a broad variety of areas and you set up political think tank as well at Waterloo, which is where we are today.
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And I also do most of my time is still with my businesses around the world.
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I spend two-thirds to three-quarters of my time with my businesses in North America, tech and other, and in Europe and the Middle East.
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So, yeah, most of my – I'm still fundamentally a businessman.
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Well, and I've seen you branch out, I suppose, or what, pursue the development of your ideas on the conceptual side in parallel to your continuing as a businessman over, let's say, the last 15 years.
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And you and I have gone to D.C. a couple of times and began to work with relatively distinguished political leaders in Congress and in the Senate there on a variety of issues like digital rights and rights in a digital age.
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So, we have some joint understanding of how things work in Washington as well, which is also useful when considering Canada in relationship to the world.
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So, we thought we'd start by talking about – I want you to take the floor here and lay out for Canadian listeners and for the international audience as well exactly the nature of Canada's, we'll say, specifically economic situation now and even over the last 30 years.
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And so, let's start with an analysis of the reality on the ground and then a causal analysis of how we got there.
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And again, I come at this as an ardent capitalist, so I'm going to explain how capitalism works and Canada's issue in this and why the U.S. and other like-type economies have thrived so much in this changed era.
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And the traditional economy is a production economy where you manufacture goods and you produce them with efficiency and scale and you sell them at a positive margin and you fundamentally compete on cost.
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And the purpose of trade agreements was to get rid of friction of moving those products or what are called tariffs or border adjustments.
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And when you set up these plants, they create domestic supply chains.
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And you get lots of these positive spillovers and the headquarters gets good performance and everything works great.
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Canada had tremendous prosperity post-World War II, really up until the early 1990s.
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About 30 years ago, the U.S. culminated a multi-year effort to birth the knowledge-based economy of intellectual property.
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And so, this culminated with putting in the NAFTA agreement, extensive intellectual property provisions in 1994.
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But also, in the World Trade Organization, the U.S. led a five-year exercise to globalize intellectual property rights.
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And it was called TRIPS, the Trade-Related Aspects for Intellectual Property Systems.
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And so, the world shifted to amassing IP assets and collecting a rent.
00:14:03.380
So, it stopped being a production-based economy only, and it became a two-legged race.
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Liberalizing markets, capital, and labor through production economy, Riccardi and comparative advantage of making things.
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So, it was a parallel race to a parallel race of enclosing knowledge using agreements to spread friction and monopoly to capture a rent based on an idea.
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So that I can make sure I got it so that everybody is clear about what happened and when.
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So, after World War II, Canada's been one of the world's wealthiest countries, and a lot of that's emerged after World War II.
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And we've certainly competed with the Americans, well, up until the 1990s, let's say, in terms of our ability to amass wealth.
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We were very productive in the natural resource economy, on the manufacturing side, and in finance.
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And so then, in the 1990s, I was in Boston, and I can remember the weeks at Harvard when Netscape emerged and the internet started to become the dominant force that it is.
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And I could feel the excitement in the U.S. at that time.
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I was there from, like, 92 to 98, and that place was just optimistic beyond belief and just bursting at the seams.
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And that's exactly the time that you're pointing to where the shift occurred.
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So, the ground that Canada had been occupying, resources, manufacturing, and finance, was based on a certain understanding of the economy and a certain set of rules.
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And what you're telling everyone, trying to tell everyone in Canada, that the ground rules shifted radically in 1994.
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And that's interesting, because that's at the time we were also doing BlackBerry.
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And my mentors were in commercialization, were in the U.S. and helping me in Washington and all the different things we had to do to navigate.
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But I think the original sin in Canada was in 1994.
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The NAFTA agreement with extensive intellectual property provisions, which was new.
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And the TRIPS agreement of the World Trade Organization, which was the globalization of the IP system.
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But what's interesting is, domestically in Canada, later that year, they published a book called The Orange Book.
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It published an orange book, and you can see it on the web, called Building a More Innovative Canada.
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And this is six months after we signed these two treaties.
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And they talk about innovation is all about jobs.
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And they make no reference to the two IP treaties that were the underpinning of innovation that they signed earlier that year.
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So the revolution occurred, but it didn't have any follow-up consequences for the reconceptualization of Canada's economy.
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Okay, so let's delve into that a little bit, because it's so important.
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And it's been difficult for me to understand this.
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So I'm sure it's difficult for our political leaders and for Canadians as a whole.
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So that first, but equally importantly, or more importantly, why did they not work to Canada's advantage?
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Well, the U.S. understood that if it was to be strong and prosperous, rich, powerful, and secure, it had to corral this knowledge.
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So the world moved from open science, open knowledge, to closed science and monopolized knowledge.
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You had to pay a rent for the permission to use somebody else's intellectual property.
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That went to all the value adds that are on top of basic resources as well.
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Yeah, intangibles are now 90% of the value of the S&P 500.
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When you have a physical asset, like this jacket is a physical asset.
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But the design, and only one person can wear it at a time.
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A million people can have that design where that's not designed at the same time.
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And the person who owns that design has a negative right that says,
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I have the legal right to stop you from using that design.
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And the economy shifted from getting rich from producing jackets alone
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to extracting a rent for the design of that jacket.
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Okay, so in the 1990s, and I think this should be clear to everybody,
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it's pretty obvious in retrospect that the world virtualized in the 1990s
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I guess one of the early things that happened there,
00:19:52.140
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00:21:17.280
Because all of a sudden, music became virtualized.
00:21:22.880
And the people who owned the physical artifacts, like records, for example,
00:21:28.660
The physical artifacts no longer signified ownership of the information.
00:21:33.700
And so, well, Napster obviously eventually morphed into Spotify, but that completely transformed
00:21:40.720
So the essential issue here is that in the 1990s and since then, the goods themselves
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virtualized and Canada signed agreements pertaining to that.
00:21:52.260
But for some reason, this is also what I'd like to understand, for some reason, we didn't
00:21:57.760
really understand what had changed or what we'd signed.
00:22:10.780
And when you physically own something, it's kind of not contested most of the time.
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But ownership of an idea evolves literally hundreds of times a day, different standards.
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And so Napster is an idea where there was very intense copyright issues that shut down
00:22:32.640
But there was a dozen very substantial copyright cases for Google.
00:22:41.000
And if you remember, all the owners of this content were litigating from New York City to
00:22:49.200
And so a bunch of judicial decisions framed the opening for Google to do search.
00:22:55.840
We see the same thing happening right now with the AI companies fighting over the right
00:23:00.200
to scrape data, for example, and derive the patterns that are underneath.
00:23:06.780
Because when you index something and you show it forward to somebody and then give a
00:23:12.580
link to that content, is that taking away their revenue?
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But now in AI, do the weights embody expressive content that fundamentally takes away the revenue
00:23:31.340
Well, I mean, yeah, replaces and takes away the revenue are two sides of the same coin.
00:23:35.100
And then at that point, the courts have to weigh in because intellectual property is not a natural
00:23:43.620
Whereas your physical possession is pretty much kind of a natural right.
00:23:50.780
But these are evolving bargains for social good.
00:23:54.060
So that's a very crucial point as far as I'm concerned.
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Because one of the things that you and I have discussed constantly and that I'm still
00:24:00.800
trying to wrap my mind around is the interplay between the social contract that you just described,
00:24:07.940
which is the legal framework that guarantees and governs ownership,
00:24:15.500
One of the things that you've pointed out to me, and I think maybe I've even learned,
00:24:19.560
is that the libertarian types who insist that if we pull the regulatory framework back and
00:24:26.640
just let the free market operate, that riches will emerge automatically.
00:24:31.560
That presupposition is not as valid as we might hope in an information age because there's a
00:24:40.460
contract underneath defining what constitutes ownership that has to be worked out before
00:24:47.300
And that's, from what I've understood from you in our discussions, that's exactly where
00:24:53.900
Okay, now, so was there something, what did we miss with the agreements?
00:25:07.420
I mean, one is that Milton Friedman talks a lot about free markets, but that predates
00:25:12.700
the knowledge-based economy and then the data-driven economy.
00:25:15.240
Right, and he's a favorite of the libertarian free market type.
00:25:17.660
Well, but the issue is the nature of these laws is to introduce friction to grant monopolies.
00:25:25.560
So free trade agreements in a production economy are to spread competition.
00:25:29.900
But then these agreements went to stronger and stronger enforcement of intellectual property
00:25:38.580
And the market and the government designs and changes the definition of ownership all
00:25:46.740
With the courts interpreting that to advance state interest, advance their-
00:25:52.800
So it becomes an instrument of geostrategic projection because if you control the valuable
00:25:58.060
assets, you're more secure and you're more rich.
00:26:01.320
And so it was a two-legged race, spreading liberalization of markets, capital, and labor.
00:26:15.660
Right, which we didn't understand and didn't do well at.
00:26:18.320
Well, but other countries did it very, very well.
00:26:22.500
Was there something, did we miss the boat with regards to the agreements as such?
00:26:30.080
No, no, we signed the same agreements as everybody else.
00:26:33.260
But as I said to you, I think the original sin was that 1994, December 1994, Orange Book
00:26:40.380
by Industry Canada, that talks about building a more innovative economy, that it's about
00:26:46.640
better jobs and more efficiency, which are production economy constructs, and never references
00:26:54.080
the two seismic treaties that the country signed six months earlier.
00:26:59.180
Okay, so is that a failure with regard to our political leadership?
00:27:09.300
Like, you've pointed out to me, let me list off some countries.
00:27:19.300
The Baltic, or the Nordic states did this well.
00:27:23.660
The countries that are thriving around the world, the developed countries that are thriving
00:27:27.360
around the world, seem to understand this and move forward.
00:27:30.760
And what's Canada's comparative situation over the last 30 years?
00:27:35.260
Well, Canada, in the last 10 years, has been last place in GDP per capita of the top 50
00:27:52.620
You know, we're last place in performance in ability-
00:28:01.360
And in the last 40 years, we're last place in the OECD in productivity, in growing that.
00:28:08.800
And then we're forecast to be last place in the next 40 years.
00:28:16.480
So, I want to take that apart because I want everybody who's listening to understand.
00:28:23.140
So, GDP, gross domestic product, is an index, and make sure I get the words right here,
00:28:28.240
is an index of overall economic productivity for the country as a whole.
00:28:33.820
And then you can divide that by the number of people and calculate how much each person
00:28:50.160
So, actually, an index of your productivity and your wealth, and an index of what you have
00:28:56.000
So, 10 years, 15 years ago, Canada was at parity, equal with the U.S., or even slightly
00:29:16.700
And we could be in a situation in five years where we're what?
00:29:27.820
So, what do you think, if we don't wake up and we look out 10 years, what's the difference
00:29:40.360
Well, as I've said, rhetorically, we become Puerto Rico without a passport.
00:29:45.120
We'll be very poor in terms of quality of life and what we can buy and no political representation,
00:29:55.220
And we have a beautiful country that both you and I love, but it's an expensive country.
00:30:00.380
So, if you don't have the prosperity, you can't pay for the health care, the public safety,
00:30:07.080
the social services, the heat, all the things that we value of being a prosperous, sophisticated
00:30:14.540
And we've seen those come under stress in this last era.
00:30:26.420
Not only in absolute sense, but also in comparison to the Americans.
00:30:29.960
Our health care system is under terrible stress.
00:30:36.640
Well, even Ontario now, which was Canada's richest province, is poorer in terms of per
00:30:42.240
capita GDP than Mississippi, which is the Americans' most poverty-stricken state.
00:30:52.760
And one and a quarter Canadians have food insecurity now.
00:30:56.980
Well, there's metrics on it, but basically, they're not able to provide.
00:31:01.700
They're skipping meals, or children are unable to be fed what they need.
00:31:05.800
So, you're not secure in providing the food to your home.
00:31:16.100
And these things, these are terrible consequences of economic policy and attention.
00:31:23.380
Now, so, what did Canada do wrong in the aftermath of these agreements that other countries did
00:31:29.600
You related an anecdote to me earlier this week.
00:31:33.880
Some gentleman you were talking to talked about his international experience with committees
00:31:43.020
And in, I mean, in the United States, they have, you know, the White House has an office
00:31:52.520
And they have, and he said he's a very, he runs a global IP, international IP association
00:31:59.680
So, that's dealing with ownership of intellectual property.
00:32:01.760
And he says all these other countries have IP attaches, but he never comes across an IP
00:32:07.720
So, the Americans have a council of businessmen and intellectual property specialists.
00:32:13.300
I presume that's tech people and lawyers who do nothing...
00:32:16.560
Pharmaceutical and Hollywood and agriculture and finance.
00:32:24.100
And all they do is concentrate on analyzing the ownership structure of abstracted property
00:32:33.100
Informing the government and legislating and negotiating so that that works in the favor
00:32:38.520
And then inserting it into, quote unquote, trade agreements that don't say trade.
00:32:42.120
You can look at the million words of the USMCA.
00:32:44.400
You wouldn't let find the words free trade in it, but they use them as instruments of regulatory
00:32:49.360
remote control to extract the rentier economy to their home country's benefit.
00:32:57.580
That's the Canada's trade agreement signed under Trump six, seven years.
00:33:04.220
And that's trumpeted often as, so to speak, as a free trade agreement.
00:33:08.220
But you say in a million words, there's no reference to free trade.
00:33:11.600
And what you're pointing out is that it's not a free trade agreement as conceptualized by
00:33:17.400
people who are thinking about a resource-based economy.
00:33:19.780
It's a protracted argument about who owns what virtual property to whose advantage.
00:33:29.840
It's an instrument for regulatory remote control.
00:33:33.100
Tell me what that means, regulatory remote control.
00:33:35.360
They set the rules for how we manage our IP systems, regulate our healthcare, put in standards,
00:33:43.220
how we manage who we can, how we do our macroeconomic policies, who we can do trade agreements with.
00:33:51.040
So it's a form of legislative control over the entire Canadian economy.
00:33:56.900
And it also had a provision to sunset it in six and a half years, which created a chronic instability,
00:34:06.160
And I was trying to explain that this is actually a ticking time bomb for Canada.
00:34:13.020
What do you mean you were trying to explain that?
00:34:14.500
I was writing and articulating that if you read the agreement, it's none of the celebration
00:34:19.380
that's happening in the economic discourse in the media of the country, that this is going
00:34:25.260
to erode our prosperity, which has happened, and it's going to come back with a bomb to
00:34:32.720
Well, you have to read the agreement and you have to understand it.
00:34:41.860
Okay, so let me drill down into this a little bit.
00:34:44.640
You tell me, yeah, well, that's why I'm talking to you, because we can benefit from the fact
00:34:50.420
So I'm going to take a concrete example, because I think those are helpful for explaining.
00:34:54.140
I know that you tell me if this is a relevant one, and if it isn't, we'll bring up one
00:34:58.900
I want you to explain to people using an example in a given corporate domain of how,
00:35:05.880
how the American advantage in control of such things has worked to Canada's detriment.
00:35:12.400
Now, one of the battles you fought, I know, was with the smart city folks.
00:35:19.020
Do you want to, do you want, is that a good example of?
00:35:22.520
Okay, so let's delve into that a little bit to make it concrete.
00:35:25.140
Yeah, but what's interesting about that is that was, our government invited Google to
00:35:30.960
privatize our largest city, government of our largest city, under the Google Sidewalk
00:35:36.860
And that was trumpeted as a triumph of negotiation for Canada and an immense economic opportunity.
00:35:44.620
You weren't happy with that, and it didn't happen.
00:35:46.920
And so it's not obvious why you weren't happy with that.
00:35:50.280
I mean, because it came packaged in a pretty nice, shiny box.
00:35:55.600
We'll have much more effective information flow.
00:36:02.600
Your objection, as I understood it, was, yeah, but Google will own all the data pertaining
00:36:09.140
to all the behavior of everyone who lives in a city like that, and that there's immense
00:36:14.760
economic value in that, but also the danger of a kind of totalizing legislative and monitoring
00:36:27.120
So you ask Canada's, we talk about Canada's original sin and how we got there.
00:36:31.440
So in 1989, and I will work into this because you see the original sin, in 1989, we signed
00:36:38.500
the original Canada-U.S. free trade agreement, and that was liberalizing all these things.
00:36:47.180
And then because of that, all Canada has to do is take its hands off everything forever
00:36:53.900
And the smartest person in the room is the one that builds no capacity and doesn't do
00:37:02.700
And so that's, you could think about that as the libertarian dream, but also the libertarian
00:37:09.520
abdication of responsibility, both at the same time.
00:37:14.660
And maybe there was some value in that orthodoxy when we were fundamentally a resource and leg one
00:37:31.300
But certainly not sufficient in a knowledge economy.
00:37:33.860
So then what happened was, we had an economic thinking capacity in the country called an economic
00:37:41.740
council, which was the equivalent of some of these sophisticated realms in the United States.
00:37:46.980
These IP offices, they have trade advisory committee.
00:37:50.420
You know, the U.S. has 50-year-old, if you go to the U.S. trade representative and search
00:37:56.360
advisory committees, they have 26 advisory committees, 700 experts, been together for
00:38:06.380
And these are smart, dedicated, patriotic people.
00:38:17.500
You just have to cut taxes, cut regulations, get out of the way.
00:38:25.280
But when you make yourself blind, you're not able to see this leg two come along because
00:38:33.120
And it's leg two that happens to be kicking the hell out of us at the moment, say, in the
00:38:38.840
So what happened was, so this was around 92, we shut down our economic council to save
00:38:49.420
It's like taking the instruments off the airplane to save money.
00:38:55.180
So the people with knowledge on the ground, and that would be people like you who could
00:39:00.140
have informed our political leaders with regard to the policies necessary to protect
00:39:05.060
intellectual property, for example, virtualized property.
00:39:11.240
There's no communication network set up to focus on that.
00:39:29.760
Well, if it's still relevant, let's talk about what happened, why that Google proposal
00:39:35.500
And the other two things that you mentioned to me recently that I thought were relevant
00:39:39.460
was the fact, for example, that the Google executives themselves have claimed that the intellectual
00:39:54.880
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A company that was for a while the largest company in the world and is still unbelievably
00:41:03.580
So, let me put one more step into this and then I'll go to the Google part.
00:41:10.660
And so, what happens is in the production economy, when you bring in a foreign branch plant, as
00:41:15.520
I said a few minutes ago, you get management, technology, you get capital, you get skills
00:41:21.960
upgrading of the workers, you get a supply chain in a factory of local vendors, and you
00:41:30.120
So, you get a lot of positive what are called economic spillovers from the manufacturing branch
00:41:36.560
When you go to an ideas economy, when you buy the company or come in, you exfiltrate the
00:41:44.120
IP, you exfiltrate the data, all of the ownership is back at the headquarters.
00:41:51.040
There is no management of any consequence in the, when you sell your Peterson Academy
00:41:59.680
into Spain, you don't set up a country president and a whole management team.
00:42:03.840
It's just, you get somebody helping you sell and localize, and then it's all run back wherever
00:42:09.380
And all the taxes and all the wealth effects happen at the home country.
00:42:16.560
And you don't pay taxes in Spain, and there's no wealth effect in Spain, and there's no
00:42:23.100
So, the spillovers in the tech industry operate exactly opposite, pretty much most of the time,
00:42:31.860
not absolutely, to how they work in the production economy.
00:42:35.900
So, using a branch plant mentality when you're dealing with tech companies is a very bad
00:42:40.660
Right, because they also take, even if they do hire people in Canada, let's say, and add
00:42:45.500
to the local economy in that way, they take the intellectual property generated by their
00:42:50.260
employees and pull it back to their centralized.
00:42:52.480
And the Canadian people are paid less, they tend to have ancillary roles, they're subsidized
00:42:59.300
through tax credits, and yet all the true wealth effects, and if they're really strong and
00:43:03.840
talented, they tend to get moved to the US and never come back.
00:43:10.240
And so, the thinking of the Google sidewalk was like setting up a pulp and paper mill in
00:43:17.920
northern Ontario, that this is great, not understanding that they'll own all the IP,
00:43:23.360
own all the data, have all the security benefits, have all the wealth effects, have all the control
00:43:29.640
benefits, and Canada gets 1%, and they get 99%.
00:43:35.600
And if you have that subordinate, low-value-added position in technology, then you get a low
00:43:42.240
GDP per capita, and you can't pay for the country.
00:43:45.800
And it gets a second leg to that, that you're not secure, which is what's happening in the
00:43:52.660
And those of us that understand what prosperity and security looks like, saying this is catastrophic,
00:43:59.560
this will be a step in the grave for the country.
00:44:02.400
Okay, so now I think we're getting a little closer to understanding at least some of the
00:44:08.860
reasons why Canada came up short since the 1990s.
00:44:12.620
Now, there's more to the story than this, but one of the things that you intimated was
00:44:18.360
that maybe the Mulroney, I'm not blaming him, but I'll just use him as an example, Mulroney
00:44:25.100
believed, like a good libertarian conservative, even a classic liberal, that eliminating trade
00:44:32.300
barriers would have economic advantage for Canada.
00:44:41.180
And his leadership predated the knowledge economy.
00:44:44.540
But the downside of that is that you can rely on an outdated and implausible, shallow, free
00:44:53.840
market libertarian ideology as a political leader to say, all that we have to do is shrink
00:45:01.040
government and get the hell out of the way and we'll get rich.
00:45:04.180
But that's a problem when the reality that you're dealing with is no longer a concrete, material, resource
00:45:15.740
Well, the government is making the market and manufactures the assets in the market and
00:45:19.940
it changes them a hundred times a day in the knowledge economy.
00:45:23.820
So you have to read the million word agreement and you have to understand it.
00:45:27.340
And you have to have a plan for getting your words in there to advance your specific
00:45:30.920
interests through your advisory councils, which is the opposite of hands-off.
00:45:35.640
And so that there's been an abdication of responsibility on the political front and the
00:45:42.220
justification for that has been something like, well, the free market will take care
00:45:47.680
And so that means even the conservatives so far haven't...
00:45:51.780
None of the political parties have addressed this problem in essentially in 30 years.
00:46:01.540
Like, we've still got the situation where other countries have done this better than
00:46:05.720
And it's not like there aren't libertarian free marketers in the United States and else,
00:46:18.300
When we were looking to move ourselves ahead economically, we slipped into a free market
00:46:23.240
and irresponsible libertarianism when that was no longer appropriate in the new markets.
00:46:29.820
We disbanded all our councils, so we're not consulting the people with on-the-ground expertise.
00:46:41.080
Because we're negotiating with people whose knowledge about these things is, first of all,
00:46:48.060
And second of all, they have, like, serious, high-powered experts who are, well, eating
00:46:54.960
And so are there other reasons that we are failing or have failed?
00:47:05.460
What bothers me so much about this, you have this country with so much potential.
00:47:22.320
So our economic structure should be much more like the Scandinavians in the U.S., but our
00:47:28.160
economic structure is much closer to Russia's right now because of this abdication.
00:47:32.360
And so you also mentioned in Google, really quickly, that the taxpayers in Canada spent 30
00:47:38.700
years funding the fundamental artificial intelligence at University of Toronto and in Alberta.
00:47:47.260
So the number three AI research center in the world is in Alberta, in Edmonton.
00:47:55.960
We gave, essentially, all that away to Google and other U.S. tech companies.
00:48:01.300
So what kind of loss is that in economic terms, do you suppose?
00:48:07.160
And you take a trillion away or you take a couple hundred billion dollars of earnings a
00:48:12.080
year on a trillion-dollar asset, that's the difference between an enormous budget
00:48:17.040
surplus paying for military and health care and public safety along the way versus a deficit...
00:48:26.060
And better paychecks versus a deficit that is eroding those services.
00:48:30.540
Well, and we've also foregone, the analysis I've looked at also suggested in the last 10
00:48:35.860
years under Trudeau, we've foregone $650 million worth of potential, like, leg one investment
00:48:44.140
Because one of the other things that's happened in Canada...
00:48:49.420
And by the way, real quick, also, we also invented fundamental technology for battery, taxpayer-funded
00:49:02.680
We have fundamental technology for mRNA out of UBC that we don't have any economic benefit
00:49:09.600
We have fundamental telecommunications technology, which we transferred from a couple dozen researchers
00:49:14.620
in many universities to Huawei with no economic ownership back to Canada.
00:49:18.880
So, this inattention to owning the assets of IP and data is an orthodoxy in Canada that
00:49:29.600
is inexplicable, that puts us, that is unique to Canada.
00:49:33.680
I've not seen it anywhere else in the world, and it's put us in last place.
00:49:40.340
Do you suppose, is it possible that this is also another manifestation of what economists
00:49:47.700
So, like, if you look across the world, people like to think that countries with plentiful
00:49:53.440
natural resources are naturally rich, but the relationship between natural resource ownership
00:49:58.820
and positioning and wealth, it's flat, and there is even some indication that it's negative,
00:50:07.400
And you have the counter example of countries like Japan, which have virtually no natural resources,
00:50:13.600
And so, is it also the case that because Canada has been blessed with this immense geographic
00:50:19.500
landscape and endless natural resources, that we've allowed ourselves to sit on our haunches,
00:50:28.740
That's a false myth perpetrated by the policy community that thinks they've done it right
00:50:34.300
when they've done it exactly wrong to manufacture an excuse why their strategies didn't work.
00:50:39.220
The U.S. is, I believe now, the largest oil producer in the world.
00:50:46.480
The Scandinavians, Finland, Norway, Sweden, Denmark, tremendous productivity and prosperity
00:50:52.660
and innovation, absolutely bursting with resources.
00:50:58.540
Canada allowed its reliance on natural resources to justify not delving into these more.
00:51:07.840
If others with resources don't have that curse, it's a different kind of curse.
00:51:12.600
Because you're saying in the resource curse, if you have resources, you won't be productive.
00:51:19.080
But others with lots of resources are extraordinary.
00:51:23.260
So this is the curse of being lackadaisical in the face of resource plenty.
00:51:27.180
Yeah, the curse of false myths by those who have failed us, yeah.
00:51:34.920
And they've got lots of other ones of complacency, and they use that.
00:51:38.820
And we'll go at cases in a few minutes on those who use this sitting-on-dead-money complacency stuff.
00:51:45.840
But not quite right now, because they use that as an excuse mechanism.
00:51:50.600
Well, I think the next thing to do, likely, is to talk about what's happened since Trump has been elected.
00:51:56.440
And the fact that, as mentioned earlier, he's rampaging around like a bull in a China shop.
00:52:01.820
And suggests that Canada is such a weak country now, and such a weak and useless country, all things considered.
00:52:08.220
That, for all intents and purposes, it might as well be, as a totality, the 51st state.
00:52:13.920
Because it has no use in existing on its own, and it's parasitical on the U.S.
00:52:18.780
And then, on top of that, which is already quite something, he's added these immense tariffs.
00:52:25.520
It's clear that he's not particularly happy with the manner in which Canada is governed.
00:52:33.120
Okay, well, tell us what you think Trump is doing.
00:52:36.600
And why you think we've—elaborate on how we've set ourself up to be the recipient of his peculiar largesse.
00:52:46.820
Well, I wrote a piece, which possibly you can put on a link during this thing called We're All Economic Nationalists Now.
00:52:53.920
And the reason I used that was that it's a phrase for strategic U-turns, coined by Milton Friedman.
00:53:04.700
The darling of the free marketer, because he famously said in the late 60s, we're all Keynesians now.
00:53:09.400
So, he spent 20 years fighting Keynes, and then when there's a crisis with Nixon,
00:53:15.000
and they had to respond to it with a bunch of new monetary and fiscal structures, he said, well, we're all Keynesians now.
00:53:21.740
Right, and Keynes was an interventionist compared to Friedman.
00:53:28.180
And what he's fundamentally saying is that economics is a social science, not a natural science.
00:53:33.740
And you have to attune your behavior to the facts on the ground.
00:53:37.300
So, if you are a Friedmanite in this contemporary reality, then attune, period.
00:53:45.940
Like to the realities of the new ownership doctrines in the knowledge economy, for example.
00:53:49.300
The nature of the geopolitical era of strategic behavior.
00:53:54.020
So, responding very specifically to what you said, the question you asked on Trump,
00:53:59.860
when you go to an intangibles economy, when you're producing economy,
00:54:04.780
you trade on a principle called comparative advantage.
00:54:08.800
Well, comparative advantage, it was done by David Ricardo, Riccardian comparative advantage,
00:54:13.740
that says, you may produce cups better than me, and even saucers better than me.
00:54:21.520
But, if I can produce saucers comparatively better than I produce cups relative to you,
00:54:33.440
Okay, lay that out one more time, because everyone needs to understand this.
00:54:38.900
And, and a saucer for $1, and I make a cup for $3, and a saucer for $2,
00:54:51.140
and I'm going to mess up my logic here, I'm absolutely worse than you on both,
00:54:59.080
but I'm comparatively better on cups, because I'm only 50% more expensive,
00:55:07.100
So, if I ship you cups, and you ship me saucers, that will rise the tide of everybody.
00:55:14.520
So, everybody has an incentive to trade on physical goods based on comparative advantage.
00:55:21.140
So, I can offer you my best, and you can offer me your best, and in consequence,
00:55:27.380
even if my best isn't as good as yours, we're both going to get wealthier.
00:55:38.000
Now, when you go to an ideas economy, which is based on a principle of restriction and monopoly,
00:55:44.800
somebody wants to be the landlord, and somebody has to be the tenant.
00:55:49.540
And you can compete on absolute advantage, or you can be the landlord 10 out of 10 times.
00:56:01.100
And what that means is, if you're a big, strong guy...
00:56:12.980
And the piece I wrote on We're All Economic Nationalists Now,
00:56:17.200
I talk about the strategic behavior, Trump 1.0, Biden took all of those things and added many more,
00:56:25.520
which you can read it, and I won't go into them now,
00:56:27.620
but he did many very substantial strategic elements of behavior.
00:56:36.260
Yeah, and then Trump took it to a whole other level very, very recently.
00:56:43.340
which means it's not a cooperative-based system.
00:56:45.660
And Canada believed in the multilateral, rules-based order.
00:56:53.420
And my exhortation is, this is an absolute advantage era that leads to strategic behavior.
00:57:00.460
And if you don't focus on being reasonably sovereign, reasonably strong,
00:57:08.880
And it's very profitable for a nation state to pick on a weak state,
00:57:13.340
especially one that has some good assets to pick and wither Canada in the era of Trump.
00:57:20.260
So, the virtualization of ownership has radically changed the nature of the international social contract.
00:57:30.540
And that's part of the reason we've been so susceptible to Trump's maneuvers in the last two months.
00:57:37.060
And we also thought that it was a multilateral, rules-based system
00:57:40.540
where control and ownership of strategic assets doesn't matter.
00:57:45.140
And we're learning a very hard lesson that who owns it and controls it is really important.
00:57:51.920
And so, we're paying a very, very sorry price for that inattention to...
00:57:58.640
Our economic policies were giving tens of billions of dollars to foreign battery companies
00:58:04.560
where we had no domestic control, no very small domestic value add.
00:58:17.980
And the Southeast Asians got really good at this.
00:58:20.060
That they said, if you want to play in the production economy, leg number one,
00:58:24.460
you've got to sign up to these rules on leg number two.
00:58:30.160
Well, if you get really good, you can start to own some too.
00:58:34.580
of which the Western Europeans and the Southeast Asians are.
00:58:39.240
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just kidding, I want the rules for this intangibles economy,
00:59:43.880
and I'm now even going to do more strategic behavior
00:59:46.740
and pull the rauke out under the production economy,
00:59:57.640
and there's an aristocracy and then there's a non-aristocracy.
01:00:06.200
That's what I mean by public without a passport.
01:00:12.520
Okay, so detail out for me and for the Canadians
01:00:16.900
what you think exactly, what the hell is Trump up to?
01:00:22.160
and the upside of that is that for the first time,
01:00:27.620
even the liberals are pretending that they're patriots
01:00:30.580
and that Canada has a self-evident reason for existing,
01:00:34.840
which is something that Trudeau has formally denied for,
01:00:38.360
well, for the whole bulk of his political career,
01:00:40.800
that we were a post-national state with no real identity,
01:00:50.940
was also, what, an untenable basis for movement into the future,
01:01:08.020
So, and, you know, when I looked at Carney's book recently,
01:01:11.080
Values, and he talks about this magical economy,
01:01:13.900
which I suppose, at least in part, is a knowledge economy
01:01:17.480
if we leave 80% of our fossil fuels in the ground.
01:01:20.200
But you might say that it's a little short on detailed plan.
01:01:28.020
Yeah, I'm trying to spend most of my time with you today
01:01:33.460
I've only said one normative thing to date so far in this,
01:01:39.700
in a liberal democracy as the best way for human flourishing.
01:01:46.320
only the second normative thing that I plan to say today,
01:01:49.780
that I think that Trump's behavior is unpresidential.
01:02:09.460
I'm also going to say that I think he miscalculated
01:02:15.660
and is counterproductive to America's interests
01:02:18.800
and actually in Canada's interests if we seize it.
01:02:47.980
Canada's to commodified labor at white collar workers.
01:03:37.420
He wants to rename the Internal Revenue Service,
01:03:41.840
and that people's taxes domestically can go down in the US
01:04:04.960
And if you get a better price for what you sell,
01:04:39.300
And we believe that's going to deflate your currency