PM Justin Trudeau's Canada

[kEiThZ]

Pause - Without going down the AUKUS rabbit hole again; what other steps can we/should be be taking.

Find more deals where we can access larger joint pools of funding that won't result in talent leaving Canada. The problem is that there aren't many. And increasingly in Cold War 2.0 they are restricted by bloc or alliance. For example, joint funding inside the EU or AUKUS. The government, so quick to dismiss AUKUS as "just a nuclear deal" now understands this. That's why they are begging for a side deal now.

What we're experiencing is the end of Canada getting privileged access that we've taken for granted for so long. And this is coming as a shock to government bureaucrats or politicians. And apparently some ideological partisans....

Clearly, we need more funds for research; but how much more, targeted where? What else do we need to be doing?

Without access to pools, we need massive budgets. We're talking multiples of what is funded now. And I'm not even sure that will make up for decreased access. But it might slow the decline.

Canada’s universities call on the government to increase research funding

Grants and scholarships young scientists in Canada rely on haven’t increased in years, while other countries boost investment in research, says president of Universities Canada

www.theglobeandmail.com

How do we bolster a more robust VC market here?

All those places talking about being the next Silicon Valley don't understand SV. What makes SV special is that there is a massive pool of entrepreneurs who have led successful companies, grown them and exited. They then take this capital, become angel investors and venture capitalists and invest in the next generation of startups. Success builds on success, because succesful entrepreneurs are most likely to recognize successful future entrepreneurs. We can't build a more robust VC market here without having entrepreneurs who built successful careers here for generations. And achieving that is massively difficult because of the in-built bias against entrepreneurs in Canada. This is everything from cultural preferences to taxation. There's that old joke about the American dream being owning your own business and the Canadian dream being getting a government job. Truer than we want to admit.

My immediate suggestion is to make housing an unattractive investment. Even those greedy capitalist Americans limit lifetime capital gains on primary residence to US$250k. Make housing less attractive as an investment and we might see more capital flow into other investments. That might at least be a start.

The thing is, this is essentially a strategy to inflate your way out of debt; but you can do the exact same thing by promoting high wage growth, which they've been doing everything to clamp down on instead.

High wage growth is 20 yr strategy. Importing more foreign students to work 30 hrs/wk at Tim's is a 2 yr strategy. A government focused on winning the next election is not going to pick a 20 yr strategy. Heck, if this government was prone to long term thinking we wouldn't be talking about a housing crisis and peak immigration 8 years into their term.

 

[kEiThZ]

By the way. What is not understood with Silicon Valley, is how much defence spending helped them then and helps them now. I didn't understand it, until I was posted in California.

The US has a massive pipeline of highly trained military personnel in California that retire right into their tech sector. They have a third of their naval nuclear fleet in California. They have major (multi- many billions) dollar military development and testing organizations for both the USAF and USN there. The Navy has their graduate school in Monterey (that's where I went). They have their largest space bases in California. So much of the aerospace and electronic sectors in California were grown by large defence contracts. Even today, aside from tech companies some of the largest employers in the Bay area are defence contractors. Heck, they mate nuclear warheads to ICBMs just outside downtown San Francisco even today.

Heck, Silicon Valley was so enmeshed into the defence and intelligence apparatus that Stanford used to be called the grad school of the CIA as a half joke because so many of their theses were classified (this is going as far as back as the 70s) and SV is often called the US military's greatest startup, going all the way back to its founding when the US military bought half of all chips produced in SV to keep the sector going. This lecture from the Computer History Museum is good:

So it's kinda laughable to me to hear, "We're the next Silicon Valley!", often from people just totally unaware of the unique history and talent of SV, who think building a popular app will grow their city into the next SV.

 

[AlvinofDiaspar]

By the way. What is not understood with Silicon Valley, is how much defence spending helped them then and helps them now. I didn't understand it, until I was posted in California.

The US has a massive pipeline of highly trained military personnel in California that retire right into their tech sector. They have a third of their naval nuclear fleet in California. They have major (multi- many billions) dollar military development and testing organizations for both the USAF and USN there. The Navy has their graduate school in Monterey (that's where I went). They have their largest space bases in California. So much of the aerospace and electronic sectors in California were grown by large defence contracts. Even today, aside from tech companies some of the largest employers in the Bay area are defence contractors. Heck, they mate nuclear warheads to ICBMs just outside downtown San Francisco even today.

Heck, Silicon Valley was so enmeshed into the defence and intelligence apparatus that Stanford used to be called the grad school of the CIA as a half joke because so many of their theses were classified (this is going as far as back as the 70s) and SV is often called the US military's greatest startup, going all the way back to its founding when the US military bought half of all chips produced in SV to keep the sector going. This lecture from the Computer History Museum is good:

So it's kinda laughable to me to hear, "We're the next Silicon Valley!", often from people just totally unaware of the unique history and talent of SV, who think building a popular app will grow their city into the next SV.

Yep - Vandenberg, Onizuka (Sunnyvale), China Lake plus there is a whole bunch of national labs there as well (Livermore, JPL, Berkeley Labs, SLAC, part of Sandia) - and umpteen aerospace companies in both the Bay Area and LA-San Diego.

AoD

 

[AlvinofDiaspar]

Without access to pools, we need massive budgets. We're talking multiples of what is funded now. And I'm not even sure that will make up for decreased access. But it might slow the decline.

Canada’s universities call on the government to increase research funding

Grants and scholarships young scientists in Canada rely on haven’t increased in years, while other countries boost investment in research, says president of Universities Canada

www.theglobeandmail.com

Very difficult for a country our size to master everything to compensate for the loss of access. France and UK do it to an extent (but even then - UK doesn't have a full-fledged space capability; France does better but it's bit of a historical thing, plus it's partly supported as a pan-European capability). Canada have a case given our location but we need to demonstrate intent and commitment with real resources and policies - which this government seem to loath.

AoD

 

[kEiThZ]

Yep - Vandenberg, Onizuka (Sunnyvale), China Lake plus there is a whole bunch of national labs there as well (Livermore, JPL, Berkeley Labs, SLAC, part of Sandia) - and umpteen aerospace companies in both the Bay Area and LA-San Diego.

AoD

Very difficult for a country our size to master everything to compensate for the loss of access. France and UK do it to an extent (but even then - UK doesn't have a full-fledged space capability; France does better but even then). Canada have a case given our location but we need to demonstrate intent and commitment with real resources and policies - which this government seem to loath.

AoD

I find that there's a certain naivete in Canada (and in a lot of smaller countries) about what it takes to have innovation at that level. This often leads to magic bullet thinking. "If we just get this superstar prof/researcher...." "If we just increase budgets by x percent...." That ignores the massive amount of infrastructure and the culture that took decades to build in Silicon Valley. You don't build an ecosystem overnight with 1-2 magic bullets.

I think Canada is particularly prone to this because we've had it so good for so long with resources and branch plant manufacturing that we've never had to really think about what it takes to really build an innovative and high value added economy. It leads to very uncomfortable discussions too. For example, how do you build up a pool of wealthy investors without seeing wealth inequality go up?

PS. Seeing (and climbing up) the SRB test stand at China Lake blew my mind.

 

[AlvinofDiaspar]

I find that there's a certain naivete in Canada (and in a lot of smaller countries) about what it takes to have innovation at that level. This often leads to magic bullet thinking. "If we just get this superstar prof/researcher...." "If we just increase budgets by x percent...." That ignores the massive amount of infrastructure and the culture that took decades to build in Silicon Valley. You don't build an ecosystem overnight with 1-2 magic bullets.

I think Canada is particularly prone to this because we've had it so good for so long with resources and branch plant manufacturing that we've never had to really think about what it takes to really build an innovative and high value added economy. It leads to very uncomfortable discussions too. For example, how do you build up a pool of wealthy investors without seeing wealth inequality go up?

PS. Seeing (and climbing up) the SRB test stand at China Lake blew my mind.

It's also cultural as well - we are much more risk/failure adverse. To an extent branch plant is unavoidable given our proximity and economic integration with the US - the issue here is what's our value-added?

Alas, I am jealous re: your visit.

AoD

 

[lenaitch]

I find that there's a certain naivete in Canada (and in a lot of smaller countries) about what it takes to have innovation at that level. This often leads to magic bullet thinking. "If we just get this superstar prof/researcher...." "If we just increase budgets by x percent...." That ignores the massive amount of infrastructure and the culture that took decades to build in Silicon Valley. You don't build an ecosystem overnight with 1-2 magic bullets.

I think Canada is particularly prone to this because we've had it so good for so long with resources and branch plant manufacturing that we've never had to really think about what it takes to really build an innovative and high value added economy. It leads to very uncomfortable discussions too. For example, how do you build up a pool of wealthy investors without seeing wealth inequality go up?

PS. Seeing (and climbing up) the SRB test stand at China Lake blew my mind.

We got by on our vast supply of natural resources. Great, until the world no longer wanted it (i.e. newsprint) or until other countries started exploiting their natural resources, often with cheaper labour and weaker environmental laws. We were the 'hewers of wood and drawers of water', as well as the breadbasket, to the world.

Algoma Steel used to get its own iron from its own mine two hours north. It was low grade, but it was well established, paid for and close. Then it became cheaper to ship it in from South America so they closed the mine. I'm not enough of an economist to figure that one out.

 

[kEiThZ]

It's also cultural as well - we are much more risk/failure adverse.

True. But I do think part of this is also fostered by government policy. For example, with reducing the risk and creating preferential tax treatment for housing as an investment. And just imagine the fight that changing these policies would entail. Governments would literally rather import hundreds of thousands of students per year, than address this.

To an extent branch plant is unavoidable given our proximity and economic integration with the US - the issue here is what's our value-added?

Sanctimony? We're a country that was part of the Manhattan Project and the Space Race. Today, we'd be arguing that we shouldn't participate in these efforts because we're not like the warmongering Americans.

Our value add in Canada is cheap skilled labour. That seems to be what the government is aiming for. Why hire in SV, when you can get 80% of that quality for 50% of the price in Canada? It's just a slight variation on the branch plant economy. Beyond that, I'm not sure what we bring to the table really....

This cheap skilled labour thing is a mug's game though. If you can send work to Toronto or Vancouver, you can also send the work to Bangalore and Warsaw and Riga. Being in the same (or close) timezone and having an understandable English accent is only worth so much....

Alas, I am jealous re: your visit.

I got to see a lot more than that too. Perks of going to a top notch school funded by the US Government. I actually did some of my thesis work at China Lake. Guess which office this was in:

 

[kEiThZ]

You want to know why we can't have capital for innovation? Here's an example:

https://twitter.com/x/status/1681865281189339136

Homeownership is so sacred in Canada, that rather than allowing a normal business cycle, the leader of what is supposed to be our pro-labour socialist party wants to subsidize existing homeowners, instead of just letting them sell if they can't afford rates. Imagine trying to convince somebody to back a startup against this kind of investment mindset.

 

[Richard White]

You want to know why we can't have capital for innovation? Here's an example:

https://twitter.com/x/status/1681865281189339136

Homeownership is so sacred in Canada, that rather than allowing a normal business cycle, the leader of what is supposed to be our pro-labour socialist party wants to subsidize existing homeowners, instead of just letting them sell if they can't afford rates. Imagine trying to convince somebody to back a startup against this kind of investment mindset.

True but if the housing market collapses because everyone sells, what good will that do?

 

[kEiThZ]

True but if the housing market collapses because everyone sells, what good will that do?

After the correction, people will realize that housing isn't a surefire investment. More of them will look for other opportunities. That creates a capital pool.

If governments, implicitly or explicitly, tell people that any and all investment in housing will be protected, or even subsidized, why should anybody be subsidized when that's where the majority of capital is committed too?

 

[AlvinofDiaspar]

Government is creating a moral hazard by removing the risk/cost of correction. You are basically encouraging gambling on the taxpayers dime - and guess what, that's exactly what people did. As long as housing is considered a government-insured investment (and not for its' utilitarian value per se) nothing will change.

AoD

 

[AlvinofDiaspar]

I find that there's a certain naivete in Canada (and in a lot of smaller countries) about what it takes to have innovation at that level. This often leads to magic bullet thinking. "If we just get this superstar prof/researcher...." "If we just increase budgets by x percent...." That ignores the massive amount of infrastructure and the culture that took decades to build in Silicon Valley. You don't build an ecosystem overnight with 1-2 magic bullets

What you really need is a critical mass in multiple domains - and you simply can't have that in smaller countries.

Sanctimony? We're a country that was part of the Manhattan Project and the Space Race. Today, we'd be arguing that we shouldn't participate in these efforts because we're not like the warmongering Americans.
Our value add in Canada is cheap skilled labour. That seems to be what the government is aiming for. Why hire in SV, when you can get 80% of that quality for 50% of the price in Canada? It's just a slight variation on the branch plant economy. Beyond that, I'm not sure what we bring to the table really....
This cheap skilled labour thing is a mug's game though. If you can send work to Toronto or Vancouver, you can also send the work to Bangalore and Warsaw and Riga. Being in the same (or close) timezone and having an understandable English accent is only worth so much....

I got to see a lot more than that too. Perks of going to a top notch school funded by the US Government. I actually did some of my thesis work at China Lake. Guess which office this was in:

View attachment 493536

Complacency and lack of care - and it is a relatively new phenomenon apparent post 60s (though our involvement in the Space Race can also be attributed to Diefenbaker killing our aerospace industry prior and these employees getting snapped up by NASA).

re: China Lake I am sure it is all restricted/classified!

AoD

 

[AlvinofDiaspar]

True but if the housing market collapses because everyone sells, what good will that do?

Bring some sense back to the market? That people who have no business owning a home wouldn't?

AoD

 

[kEiThZ]

What you really need is a critical mass in multiple domains - and you simply can't have that in smaller countries.

AoD

Do we need multiple domains or just some domains done really well? There's the Nordic model. It does kinda work.

• High personal taxes.
• Low corporate taxes.
• Substantial support to strategic sectors including their defence sector.

But this would entail some real sacrifices that I'm not sure most Canadians would support. It probably has to get really bad before the country changes course. We're probably a long ways out from that.