Jen, I normally love your On The Line's, but I'm not really sure why you decided to invite James on? This very rapidly turned into a hostile takedown interview. Maybe I missed something he said near the beginning that prompted it?
I’ve noticed some of Jen’s interviews can be spirited, as she becomes a participant/contributor in the interview. There is strength and charm to that! However, I don’t think it worked as well here. It seemed that she ultimately still wanted to understand and engage, but I think defaulting to the challenge function made discussion hard at times. She was good at probing the underlying logic. Saying this, I think the connection was missed - and made harder to be emphasized by how the conversation went - that changing the regulatory landscape is (partly) what would encourage Canadian companies to emerge to fill specialized niches in the Canadian economy. That is, until Canada mandates some data needing to be Canadian soil/server/company, competitive companies can’t emerge to target that, as they’re stuck competing against the size and scale of the US industry’s genera services. It felt like this disconnect in the conversation generated what could fee adversarial. I feel that especially because Jen is so kickass at engaging with and connecting diverse ideas/people, so I want those connections to really happen in the conversation itself. I think a version of this interview that would’ve been equally fascinating is if Jen was trying to help elicit and clarify James’ points collaboratively with less immediate testing - build it up with him then test it more broadly towards the end.
This is a really useful interview because Jen clearly displays the aggressive fatalism that is so pervasive in Canadians. Before getting into the weeds on policy, anyone who cares about sovereignty needs to do a lot of work just to convince Canadians that sovereignty is even desirable! Compare that to many other countries where control over their own domain is automatically assumed to be necessary.
The Americans don’t just throw up their hands and say “Well, China is bigger so our companies can’t scale against theirs so let’s not even try.” They chuck bundles of money at tons of promising ventures and don’t hesitate to restrict foreign involvement on national security grounds. USA USA! China simply does not allow foreign control of their corporations. Joint venture with technology transfer or go home.
Canada used to do that too. We mandated domestic ownership of critical industries. We built our own research and development sector. We had our own world class tech companies in the 90’s, like ATI, Corel, Nortel, and RIM. And we let it go in the 2000s because globalization and “the market” were supposed to govern the now flat world. So now American tech monopolies govern us, and it’s really hard to get Canadians to understand that it’s a problem!
I found the interview more of a depressing reminder that people are still attracted to the idea of national industrial policies despite decades of failure, and seem to think that *this time* it'll work because *this time* we'll do it *right*!! It's an old problem, and it's bipartisan: Trudeau Liberals and Orchard Conservatives share the same vice.
ATI, Corel, Nortel, and RIM soared because they made products that reached beyond Canada's market; they crashed because they failed to remain competitive. Government funding wouldn't have made a difference to RIM's failure to respond to the iPhone; a protected Canadian market would only have stuck Canadians with using obsolete tech in an effort to prop up a domestic company. (We've done that lots in the past - if you remember the '80s, you'll remember Brooks running shoes that were cheaper than Nike or Reebok because of protectionist tariffs, but were usually panned by athletes because they hurt their feet.)
As for government funding to advance technology and support R&D, those who cite the example of American defense investment in semiconductors always miss an essential point: the US military was investing in such things because they wanted the product and needed the technology. That's an important distinction from mere government subsidy of R&D activities, as it implies that there's in fact a market demand for the technology or product.
On what basis do you claim that national industrial policies were a failure? Those are what turned Canada from an agricultural colony into an industrial powerhouse with world-class technology. It's only since we turned to free trade and loose capital controls that our industrial might withered away.
Did you know that Canadian VC fundraising is half of what it was in the 90's? We used to have capital markets that served Canada. Now we don't. That's government policy that allowed that to happen.
The Canadian government and military need products and technology too. They should buy more of it from Canadians.
If we don't want to have our own industrial policy, someone else will impose their policy on us - and we won't like the result. That's what has been happening for the last 30 years. We deserve all the 51st state threats because an awful lot of Canadians don't seem to think that we can be a sovereign state without doing any work or spending any money.
I've got two criteria for whether an industrial policy has been successful:
1) Are the resulting industries self-sustaining without continuing government funding and subsidies? This is a bare minimum.
2) Does the government recoup its investment in the industry through taxes and increased economic activity?
There's very few examples of success based on those criteria. Bombardier was flying high in the '90s and early 2000s based on the investments governments had put in bankrupt Canadair and DeHavilland Canada to develop the Challenger and Dash 8. There's a certain advantage to launching a business when somebody else had already paid for development of the products. On the other hand, the company stumbled badly developing the C200 and is now owned by Airbus. We already talked about RIM/Blackberry (also no longer a going concern.) Do we want to talk about Canadian champion SNC-Lavalin? CPKC and CN are legitimate successes, but the investment in CPKC was over a century ago and the railway has a complicated legacy with many generations of western Canadian farmers.
That's a very strange way to think about national success. It's like anti-sovereignty. Things are only successful if the government doesn't spend money. Why would a private corporation invest in a nation that refuses to invest in itself?
Other nations don't think that way, and they're perfectly happy to extract all the good stuff from the nations that do.
The C-series is a good example. Boeing (probably the most government funded corporation in history) used its influence with the US government to tariff the C-Series out of the US market and ultimately crush Bombardier Aviation. The USA decided that Canada should not be allowed to develop aircraft. That should have been one of many clues that the global free market was a fiction, and Canada was following a different set of rules than the big boys.
One major industrial policy success story is the oil sands. Government money funded the first drill holes in the 1890s, the early research and development, the first separators and refineries, Suncor, Syncrude, and the Transcanada Pipeline. It took almost a century to become profitable amid many failed starts and bailouts. We can do big important things if we just get over this weird commitment to fatalism and cheapness.
I have watched in the past Jim Balsillie explain our particular Canadian IP problems. He does a good job of communicating why we are so far behind in this space.
Balsillie’s view is:
“Canada pays to create valuable ideas, but too often foreign companies end up owning them. In a digital economy, ownership of IP, data, and platforms—not just producing goods—is what determines who becomes wealthy.”
That’s the theme that runs through almost every speech, article, and presentation he’s given on the topic.
One interesting aspect of his argument is that he doesn’t think Canada has an innovation problem; he thinks Canada has an ownership problem. He believes we generate plenty of ideas but don’t retain enough control over the resulting economic value.
I think this guest is trying to say the same but struggles with his explanations
Absolutely excruciating listen the first half especially. Hypotheticals shot down left and right ruthlessly by Jen. 10/10 this is why I subscribe to the Line
I had the same take...but for different reasons. Jen talks a lot about how The Line has limited growth potential due to the audience...but that has nothing to do with the issue at hand. Regardless of the size of the Canadian market, Canadian platforms can (at least in theory) scale up. There are no fundamentals that prevent this. This is not aluminum, there is no geography that constrains it. Shopify is a prime example of this.
I believe the point being made is that we can have more of those, and more scale of them, with the right policy changes. We could have an AWS or Azure that not only allows data to live here, but for the company itself to be constrained by Canadian law.
I made it through the first 18 minutes and I'm glad that I did. I work in tech, but I work in tech for Americans because _they pay more_. This is the case for almost every Canadian who goes to subsidized university, then gets into software. Poilievre once quipped that Waterloo Grads are our most famous export...
More European-style regulations isn't going to solve the issue. If you want digital sovereignty, you're going to want an environment where our workers aren't compelled to work for American companies. To do that, you're going to need to make more private capital. Venture Capital. To do that, you're going to need more incentives that promote private investment, and to do that, you're going to need to ditch the crab-bucket culture and make it socially acceptable for non-landed individuals to become obscenely rich. Jen got most of that.
European regulation will get you European results, where the market cap of new all new businesses will be no more the market cap of Home Depot in the US.
Listening to Jen here reminded me of why I really enjoy listening or reading her. Her sharp wit and her residence in the world of reality were both on display and remind me why I should pay more attention to her especially when I disagree with her.
The discussion essentially ended with “we have a lot to do”. Very similar to the state of the Canadian Military. Similar to a married couple having a single bank account and then one of them decides “this ain’t working for me anymore” and empties the account. Outsourcing to the U.S. has been the path of least resistance for many Canadian governments but I would say many Canadians have been left ignorant of the costs. Too busy living our lives. Sovereignty is a buzz word that is on the tips of many politicians these days. Actual Canadian sovereignty started slipping away decades ago.
I had to take a break about 20 minutes in because I was starting to get annoyed. I wanted to hear more from James to understand what he was trying to say. Its possible his arguments are trash, but he hasn't been given the chance to lay them out to this point. I appreciate Jen's enthusiasm and passion for the topic - it shows. I also appreciate challenging the position being presented by the interviewee. However, I need more balance. I'd like to see the interviewee be given the chance to layout their position and rationale without being cutoff after every sentence.
That's ok though, not every episode is going win a Grammy. I am still a fan of both Jen and The Line and look forward to the next one. I will listen to the remainder of this episode after I take a short breather.
This was difficult to listen to - not only because James couldn’t articulate his positions effectively, or because most of his ideas are fully thought out and pressure tested - but also, because some of his specific positions are already in place - and has been for a while.
Canadian federal government regulations does have sovereignty requirements for data storage in Canada, with technology managed by Canadians with Canadian clearance; for certain types of data. We can certainly talk about dependencies - such as dependency on American stack for email (take your pick between Google and Microsoft) or for other software and hardware requirements that aligns to US standards (but we are in a NATO alliance - so that also makes sense historically at least).
There is definitely discussion to be had about software reliance, or what else should be declared needing to be following the sovereign rules (banking? telecoms? Interac?). But it is not because the rules don’t exist, or those rules are lax.
Canadian VC Matt Roberts wrote a long piece about the lack of tech strategy in Ottawa. One small part that stood out to me is that our Maple Eight public sector pension funds finance the American VC funds that buy Canadian startups. We're using our own tax dollars to subsidize foreign buyouts of our innovative companies instead of investing in our own economy. Insane, self-destructive policy that would be unthinkable in other countries.
I really enjoyed this interview because Jen really pushed the host. I would like more interviews to be like this, not because they need to be hostile or argumentative (although this was) but because it forces the interviewee to actually elaborate and stress test their ideas. I learned more this way. And McLeod obviously failed at the stress test.
One small caveat, I think McLeod had one valid point (he did not explain well) in that these large companies like Google (and many others) grow up in a specific rules environment. Canada changing the rules here will not overthrow Google, but it will create a new playing field that PERHAPS new Canadian players can succeed in. It at least creates space for that too happen.
Of course, if the new rules are too hamfisted you further hamstring innovation and paradoxically will benefit companies like Google. Look at Europe as a great example.
Technological innovation requires vast amounts of capital investment. Canada is not a country that attracts investment. High taxes to service high debt and smothering regulations send investors to more welcoming countries like, I dislike saying it, the USA.
I have 37 minutes left in the podcast, and I am done. This guy cant explain himself or answer simple questions. He is also very boring. I am simply not entertained.
Why it looks Naive: The Reality of the Canadian Market
The argument that this policy is naive rests on two unyielding economic realities:
1. The Scale Problem
Canada has a population of roughly 40 million people. We do not have the domestic market size of the United States (340+ million) or the European Union (450+ million). The U.S. can pass massive bills like the CHIPS Act because its domestic market can sustain entirely self-contained supply chains. If Canada tries to build completely insular, end-to-end domestic supply chains for high-tech or heavy industrial goods, the lack of local scale will inevitably make our products more expensive, less competitive, and slower to market.
2. The Innovation Delusion
Advocating for a "sovereign patent pool" or for forcing data to remain strictly within Canadian borders may sound secure, but it ignores how modern innovation actually works. Capital and top-tier talent flow to where the ecosystems are largest and most liquid. If a Canadian startup is forced to navigate thick regulatory walls regarding data residency or IP retention, it may find itself cut off from Silicon Valley venture capital or global cloud scale. Instead of protecting Canadian innovation, it risks starving it of the oxygen it needs to grow.
Jen, I normally love your On The Line's, but I'm not really sure why you decided to invite James on? This very rapidly turned into a hostile takedown interview. Maybe I missed something he said near the beginning that prompted it?
Came here to say the same thing, this interview was absolutely painful to listen to.
I’ve noticed some of Jen’s interviews can be spirited, as she becomes a participant/contributor in the interview. There is strength and charm to that! However, I don’t think it worked as well here. It seemed that she ultimately still wanted to understand and engage, but I think defaulting to the challenge function made discussion hard at times. She was good at probing the underlying logic. Saying this, I think the connection was missed - and made harder to be emphasized by how the conversation went - that changing the regulatory landscape is (partly) what would encourage Canadian companies to emerge to fill specialized niches in the Canadian economy. That is, until Canada mandates some data needing to be Canadian soil/server/company, competitive companies can’t emerge to target that, as they’re stuck competing against the size and scale of the US industry’s genera services. It felt like this disconnect in the conversation generated what could fee adversarial. I feel that especially because Jen is so kickass at engaging with and connecting diverse ideas/people, so I want those connections to really happen in the conversation itself. I think a version of this interview that would’ve been equally fascinating is if Jen was trying to help elicit and clarify James’ points collaboratively with less immediate testing - build it up with him then test it more broadly towards the end.
This is a really useful interview because Jen clearly displays the aggressive fatalism that is so pervasive in Canadians. Before getting into the weeds on policy, anyone who cares about sovereignty needs to do a lot of work just to convince Canadians that sovereignty is even desirable! Compare that to many other countries where control over their own domain is automatically assumed to be necessary.
The Americans don’t just throw up their hands and say “Well, China is bigger so our companies can’t scale against theirs so let’s not even try.” They chuck bundles of money at tons of promising ventures and don’t hesitate to restrict foreign involvement on national security grounds. USA USA! China simply does not allow foreign control of their corporations. Joint venture with technology transfer or go home.
Canada used to do that too. We mandated domestic ownership of critical industries. We built our own research and development sector. We had our own world class tech companies in the 90’s, like ATI, Corel, Nortel, and RIM. And we let it go in the 2000s because globalization and “the market” were supposed to govern the now flat world. So now American tech monopolies govern us, and it’s really hard to get Canadians to understand that it’s a problem!
I found the interview more of a depressing reminder that people are still attracted to the idea of national industrial policies despite decades of failure, and seem to think that *this time* it'll work because *this time* we'll do it *right*!! It's an old problem, and it's bipartisan: Trudeau Liberals and Orchard Conservatives share the same vice.
ATI, Corel, Nortel, and RIM soared because they made products that reached beyond Canada's market; they crashed because they failed to remain competitive. Government funding wouldn't have made a difference to RIM's failure to respond to the iPhone; a protected Canadian market would only have stuck Canadians with using obsolete tech in an effort to prop up a domestic company. (We've done that lots in the past - if you remember the '80s, you'll remember Brooks running shoes that were cheaper than Nike or Reebok because of protectionist tariffs, but were usually panned by athletes because they hurt their feet.)
As for government funding to advance technology and support R&D, those who cite the example of American defense investment in semiconductors always miss an essential point: the US military was investing in such things because they wanted the product and needed the technology. That's an important distinction from mere government subsidy of R&D activities, as it implies that there's in fact a market demand for the technology or product.
On what basis do you claim that national industrial policies were a failure? Those are what turned Canada from an agricultural colony into an industrial powerhouse with world-class technology. It's only since we turned to free trade and loose capital controls that our industrial might withered away.
Did you know that Canadian VC fundraising is half of what it was in the 90's? We used to have capital markets that served Canada. Now we don't. That's government policy that allowed that to happen.
The Canadian government and military need products and technology too. They should buy more of it from Canadians.
If we don't want to have our own industrial policy, someone else will impose their policy on us - and we won't like the result. That's what has been happening for the last 30 years. We deserve all the 51st state threats because an awful lot of Canadians don't seem to think that we can be a sovereign state without doing any work or spending any money.
I've got two criteria for whether an industrial policy has been successful:
1) Are the resulting industries self-sustaining without continuing government funding and subsidies? This is a bare minimum.
2) Does the government recoup its investment in the industry through taxes and increased economic activity?
There's very few examples of success based on those criteria. Bombardier was flying high in the '90s and early 2000s based on the investments governments had put in bankrupt Canadair and DeHavilland Canada to develop the Challenger and Dash 8. There's a certain advantage to launching a business when somebody else had already paid for development of the products. On the other hand, the company stumbled badly developing the C200 and is now owned by Airbus. We already talked about RIM/Blackberry (also no longer a going concern.) Do we want to talk about Canadian champion SNC-Lavalin? CPKC and CN are legitimate successes, but the investment in CPKC was over a century ago and the railway has a complicated legacy with many generations of western Canadian farmers.
That's a very strange way to think about national success. It's like anti-sovereignty. Things are only successful if the government doesn't spend money. Why would a private corporation invest in a nation that refuses to invest in itself?
Other nations don't think that way, and they're perfectly happy to extract all the good stuff from the nations that do.
The C-series is a good example. Boeing (probably the most government funded corporation in history) used its influence with the US government to tariff the C-Series out of the US market and ultimately crush Bombardier Aviation. The USA decided that Canada should not be allowed to develop aircraft. That should have been one of many clues that the global free market was a fiction, and Canada was following a different set of rules than the big boys.
One major industrial policy success story is the oil sands. Government money funded the first drill holes in the 1890s, the early research and development, the first separators and refineries, Suncor, Syncrude, and the Transcanada Pipeline. It took almost a century to become profitable amid many failed starts and bailouts. We can do big important things if we just get over this weird commitment to fatalism and cheapness.
I have watched in the past Jim Balsillie explain our particular Canadian IP problems. He does a good job of communicating why we are so far behind in this space.
Balsillie’s view is:
“Canada pays to create valuable ideas, but too often foreign companies end up owning them. In a digital economy, ownership of IP, data, and platforms—not just producing goods—is what determines who becomes wealthy.”
That’s the theme that runs through almost every speech, article, and presentation he’s given on the topic.
One interesting aspect of his argument is that he doesn’t think Canada has an innovation problem; he thinks Canada has an ownership problem. He believes we generate plenty of ideas but don’t retain enough control over the resulting economic value.
I think this guest is trying to say the same but struggles with his explanations
Absolutely excruciating listen the first half especially. Hypotheticals shot down left and right ruthlessly by Jen. 10/10 this is why I subscribe to the Line
I had the same take...but for different reasons. Jen talks a lot about how The Line has limited growth potential due to the audience...but that has nothing to do with the issue at hand. Regardless of the size of the Canadian market, Canadian platforms can (at least in theory) scale up. There are no fundamentals that prevent this. This is not aluminum, there is no geography that constrains it. Shopify is a prime example of this.
I believe the point being made is that we can have more of those, and more scale of them, with the right policy changes. We could have an AWS or Azure that not only allows data to live here, but for the company itself to be constrained by Canadian law.
His benefit arguments are all hypotheticals. He can't outline any solution that is a meaningful alternative to what exists.
I made it through the first 18 minutes and I'm glad that I did. I work in tech, but I work in tech for Americans because _they pay more_. This is the case for almost every Canadian who goes to subsidized university, then gets into software. Poilievre once quipped that Waterloo Grads are our most famous export...
More European-style regulations isn't going to solve the issue. If you want digital sovereignty, you're going to want an environment where our workers aren't compelled to work for American companies. To do that, you're going to need to make more private capital. Venture Capital. To do that, you're going to need more incentives that promote private investment, and to do that, you're going to need to ditch the crab-bucket culture and make it socially acceptable for non-landed individuals to become obscenely rich. Jen got most of that.
European regulation will get you European results, where the market cap of new all new businesses will be no more the market cap of Home Depot in the US.
Listening to Jen here reminded me of why I really enjoy listening or reading her. Her sharp wit and her residence in the world of reality were both on display and remind me why I should pay more attention to her especially when I disagree with her.
The discussion essentially ended with “we have a lot to do”. Very similar to the state of the Canadian Military. Similar to a married couple having a single bank account and then one of them decides “this ain’t working for me anymore” and empties the account. Outsourcing to the U.S. has been the path of least resistance for many Canadian governments but I would say many Canadians have been left ignorant of the costs. Too busy living our lives. Sovereignty is a buzz word that is on the tips of many politicians these days. Actual Canadian sovereignty started slipping away decades ago.
“BY GOD NOW IT'S GERSON WITH A STEEL CHAIR!”
I had to take a break about 20 minutes in because I was starting to get annoyed. I wanted to hear more from James to understand what he was trying to say. Its possible his arguments are trash, but he hasn't been given the chance to lay them out to this point. I appreciate Jen's enthusiasm and passion for the topic - it shows. I also appreciate challenging the position being presented by the interviewee. However, I need more balance. I'd like to see the interviewee be given the chance to layout their position and rationale without being cutoff after every sentence.
That's ok though, not every episode is going win a Grammy. I am still a fan of both Jen and The Line and look forward to the next one. I will listen to the remainder of this episode after I take a short breather.
Alberta separatism has Jen feeling prickly! 🤣
And yeah, when the fundamental plan is "Digital Sovereignty through vibes" the criticisms Jen leveled are fully deserved.
This was difficult to listen to - not only because James couldn’t articulate his positions effectively, or because most of his ideas are fully thought out and pressure tested - but also, because some of his specific positions are already in place - and has been for a while.
Canadian federal government regulations does have sovereignty requirements for data storage in Canada, with technology managed by Canadians with Canadian clearance; for certain types of data. We can certainly talk about dependencies - such as dependency on American stack for email (take your pick between Google and Microsoft) or for other software and hardware requirements that aligns to US standards (but we are in a NATO alliance - so that also makes sense historically at least).
There is definitely discussion to be had about software reliance, or what else should be declared needing to be following the sovereign rules (banking? telecoms? Interac?). But it is not because the rules don’t exist, or those rules are lax.
Canadian VC Matt Roberts wrote a long piece about the lack of tech strategy in Ottawa. One small part that stood out to me is that our Maple Eight public sector pension funds finance the American VC funds that buy Canadian startups. We're using our own tax dollars to subsidize foreign buyouts of our innovative companies instead of investing in our own economy. Insane, self-destructive policy that would be unthinkable in other countries.
https://newsletter.mattroberts.com/p/having-no-strategy-is-a-strategy
I really enjoyed this interview because Jen really pushed the host. I would like more interviews to be like this, not because they need to be hostile or argumentative (although this was) but because it forces the interviewee to actually elaborate and stress test their ideas. I learned more this way. And McLeod obviously failed at the stress test.
One small caveat, I think McLeod had one valid point (he did not explain well) in that these large companies like Google (and many others) grow up in a specific rules environment. Canada changing the rules here will not overthrow Google, but it will create a new playing field that PERHAPS new Canadian players can succeed in. It at least creates space for that too happen.
Of course, if the new rules are too hamfisted you further hamstring innovation and paradoxically will benefit companies like Google. Look at Europe as a great example.
Technological innovation requires vast amounts of capital investment. Canada is not a country that attracts investment. High taxes to service high debt and smothering regulations send investors to more welcoming countries like, I dislike saying it, the USA.
I have 37 minutes left in the podcast, and I am done. This guy cant explain himself or answer simple questions. He is also very boring. I am simply not entertained.
Why it looks Naive: The Reality of the Canadian Market
The argument that this policy is naive rests on two unyielding economic realities:
1. The Scale Problem
Canada has a population of roughly 40 million people. We do not have the domestic market size of the United States (340+ million) or the European Union (450+ million). The U.S. can pass massive bills like the CHIPS Act because its domestic market can sustain entirely self-contained supply chains. If Canada tries to build completely insular, end-to-end domestic supply chains for high-tech or heavy industrial goods, the lack of local scale will inevitably make our products more expensive, less competitive, and slower to market.
2. The Innovation Delusion
Advocating for a "sovereign patent pool" or for forcing data to remain strictly within Canadian borders may sound secure, but it ignores how modern innovation actually works. Capital and top-tier talent flow to where the ecosystems are largest and most liquid. If a Canadian startup is forced to navigate thick regulatory walls regarding data residency or IP retention, it may find itself cut off from Silicon Valley venture capital or global cloud scale. Instead of protecting Canadian innovation, it risks starving it of the oxygen it needs to grow.