Recalculating Risk: The Key to Canada's Future Success

By Michael Ciotti

The Golden Goal, 2010 Vancouver Olympics

A Destiny Unrealized

Approximately twenty years ago, an article put forth a provocative thesis that I couldn’t help but take great pride in. The article theorized that due to Canada’s large land mass and abundance of natural resources (including fresh water), our nation was uniquely positioned to become the world’s next economic superpower. Many more articles have been written in support of that thesis, each citing Canada’s unique X factors including stable government, strong institutions, and a steady flow of skilled immigrants. Hockey references have been overused lately but here’s another one, Canada was an up and coming talent that possessed all of the innate skills needed to become an impactful superstar, maybe even a Hall of Famer. On paper, we had what it would take to achieve greatness, we just needed to ‘show up’. 

Yet, here we are, decades later, stuck in neutral and lacking direction on how to solve our abysmal economic situation. In addition to our lagging economic performance, our country is at a crossroads. Who could have imagined that we would be fearing for our sovereignty while being held hostage economically by our former ally and largest trading partner. Before we get carried away with finger pointing and assigning blame, I want to make it clear - this is not political.

Taking a step back, we see that this issue transcends party and policy. Both Liberals and Conservatives have failed to advance economic policy in a way that has stimulated innovation, rewarded our brightest minds, and encouraged our country to compete on a global scale. At what point do we look into the mirror and ask ourselves, why has our economic greatness not materialized? Why have we not lived up to our potential? Why have we failed? 

At the risk of oversimplifying what is undoubtedly a complex problem, one would argue that a major source of Canada’s economic stagnation comes from a misguided appetite for risk. As Canadians, our near-zero tolerance for ‘taking swings’ both big and small has resulted in our nation’s business leaders and politicians forgoing disruption for stability. This has led to a culture of trepidation that’s been resistant to making meaningful investments into the technology needed to deliver innovation, productivity, and growth. And while we’ve been reluctant to change, the world has been aggressive and we find ourselves left behind.  

Scar Tissue

To be clear, I’ve had a complicated relationship with risk myself. Up until recently, I had been climbing the corporate ladder at Salesforce, one of the world's most innovative technology companies, for nearly 10 years before leaving to pursue my entrepreneurial dream. I am embarrassed to admit that it had been nearly 5 years since I purchased the Outsider Capital web domain and began preaching my vision for a disruptive, innovative investment fund that would deliver tech-enabled growth to anyone who would listen. Why, like so many Canadians, was I so averse to risk? Upon reflection, I realized that like so many other Canadians, I had scar tissue. 

I grew up in Manotick, Ontario, a small suburb about 25 minutes south of Ottawa. Manotick was not too far from Kanata which during the nineties was becoming a major technology hub known to some as Silicon Valley of the North. I was only a kid during Ottawa's technology boom but everyone noticed when our historically sleepy government town started to catch fire. Stocks of companies like Nortel, JDS Uniphase, Cognos, and Corel skyrocketed as their respective valuations detached from any sense of reality. Ottawa was flush with newly minted millionaires and people were spending their newfound wealth on fancy cars, boats, and cottages. There was a certain excitement and exuberance that spurred people to take on risk and build fortunes of their own. It was an exciting time for the city and a blossoming Canadian industry. 

It seemed like the good times would go on forever until the music stopped and the DotCom bubble burst in 2001. The same companies that had helped create paper fortunes had come crashing down to earth at a breakneck pace. I recall hearing my parents whisper to each other about one (and then many) of the parents from our hockey teams being laid off. Houses went up for sale, sports cars disappeared from driveways, and fewer kids were coming back from tropical vacations. The heavy feeling of crushed dreams and failure lingered in the air long after companies were delisted and their names came off buildings. The sprawling JDS Uniphase campus sat vacant for years, an eerie reminder of what happens when you get too big too fast. The Ottawa Senators still play in a field adjacent to Kanata’s business parks. The rink, formerly known as the Corel Center, was supposed to anchor a mega development that never materialized. 

Over time, Canada slowly moved past the failures of the DotCom era and started to rebuild, but the damage was done. Beneath the surface, Canada’s appetite for risk was becoming non-existent. Many of the battle-hardened leaders would retire and a generation of risk-averse middle managers who had come of age during the dark times of the downturn would take their place. These leaders performed satisfactorily, growing their organizations slowly, if it all. Skeptical of an industry that had blown up before, they were afraid of new technology and had no interest in what was the latest or greatest. Their purpose became managing the downside and they used terms like “risk mitigation” when speaking about their plans for future growth. And over time, the tepid approach and near zero appetite for risk became the Canadian way. We were stable, barely inching forward but safe. And so began Canada’s slow descent into mediocrity. 

And then, in 2008, it all came crashing down again. Our southern neighbour’s insatiable greed and outsized appetite for risk threatened the global financial system. To our credit, Canada was well prepared to weather the economic storm and our culture of risk aversion was, at least for the time being, validated. Amongst the economic uncertainty, there were unintended consequences of our own safety. From that point onwards, we would surrender to the status quo and continue down the same path we had been on for almost a decade, a path that prioritized stability over just about anything else. The rest of the world emerged from the ashes and rebuilt their economies with efficiency, scale, and innovation in mind. Sitting on the sidelines, we fell even further behind.

Winning Matters

I am not suggesting that we act like maniacal cowboys with a billions or bust mentality. Canadians are unique from Americans and we should not lose sight of the fact that our strength as a people is rooted in our compassion for each other. However, our compassion can not lead to meekness and complacency. Canadians must rediscover our fire within, because frankly Americans don’t just want to win, they want to dominate.

During my time at Salesforce I noticed that our country’s businesses have grown too comfortable with simply ‘participating’. Participation medals are simply not good enough given what is at stake. We need to get back to winning but it feels as though we’ve forgotten how to do so. The future of our nation depends on us awakening from our slumber and asserting ourselves on the global scale. Because while we slept, American competitors have come for every single percentage of market share, leaving Canadian companies picking up the crumbs and trying to stay alive long enough to get acquired by the very companies we struggle to keep pace with. 

Still, excuses will be made because there are other factors, of course. American companies have better access to capital, a larger talent pool, and a bigger market to sell into. But they also have a different mindset. When Americans look out at the horizon, they only see the upside. They aren’t paralyzed by a fear of failure but rather allow themselves to dream big and think ‘what if’. They are so unapologetically ambitious in their visions that their founders are known to suffer from the ‘reality distortion field’. The result indeed can be colossal failure, embarrassment, and even prison. But it can also result in world class, innovative companies succeeding on unimaginable levels. 

I witnessed this relentless pursuit of operational excellence and growth while at Salesforce. The company’s high performance culture was demanding but inspiring and effective. Execution was everything and everyone operated with urgency, delivering on audacious revenue targets year after year. And yes, there are exceptions in Canada. We are lucky to have visionary Canadians building world class, growth oriented Canadian companies, Shopify and GFL are recent examples that come to mind. But a few exceptions is not good enough for a nation of our calibre.

Unlike Americans, when we look out at the world, our gaze fails to see above the horizon. Our dreams have been clouded by nightmarish scenarios where we fixate on risk and assume that it will lead us to failure, not success. This mindset biases us towards a safe and comfortable status quo that we have been led to believe is stable. But as we’ve seen in recent years, the greatest risk in a fast paced world isn’t taking chances, it’s standing still. As we’ve settled into our ways, the world around us has advanced to the point that now we can barely keep up. But is this even our nature as Canadians? We’re a proud, hockey obsessed country where we don’t just expect to win playing the Americans or the Europeans, we expect to dominate. So why have we gotten used to losing economically?

Our Time

It’s been said that Canada has the foundation required to be an economic powerhouse. On top of our abundance of natural resources, we are a nation of intelligent, hardworking people that have access to affordable education, free healthcare, and now more than ever, are united as a proud, flag waving nation. Regardless of who wins the upcoming election, the next government must prioritize winning. The newly elected government must fulfill its duty of protecting its citizens and ensuring every Canadian has an opportunity to do great things. It’s up to us, the citizens, to step up but we need our government to clear a path so that we can fulfill our destiny. This means instituting economic policy that incentivizes, not penalizes, innovation and growth. I launched Outsider Capital because I believe Canada has the greatest economic upside of any nation in the world. But the opportunity won’t be handed to us, it needs to be built — by bold leaders, big bets, and a renewed cultural willingness to take risks.

In February, I watched Canada battle through the Four Nations tournament on route to victory over the Americans. The grit, the unity, the resilience, it reminded me of who we are at our best. Our country has endured hardships. We’ve faced setbacks. But together we’ve always found a path forward. Whether it’s hockey or war, we are at our strongest when we have our backs against the wall and are united in our pursuit of a common goal. It’s been a few tough years and we might be down a few goals but everyone knows that you never count out a Canadian.