I grew up on a farm in rural New Brunswick. I\u2019m writing this instead of protecting potato fields from blight because I was conditioned at a young age to see farming as a thankless endeavour. The humanities came easier than calculating the optimal dose of fungicide per acre, so here I am.<\/p>\n
There\u2019s a reason I\u2019m sharing my origin story. It relates to what I think is the root cause of why Canada\u2019s economy is in so much trouble: our culture of risk aversion has caught up to us. Existing companies don\u2019t want to invest, and talented people don\u2019t want to create new ones. It\u2019s a doom loop that has caused the economy to stagnate.<\/p>\n
I wrote<\/a> about Canada\u2019s flickering entrepreneurial spirit a year ago\u2014and the year<\/a> before that. It isn\u2019t getting better. Angel<\/a> investing is at a five-year low and venture<\/a> investing is at a nine-year low. Business exit rates have exceeded entry rates for the better part of two years. The Canadian Federation of Independent Business (CFIB) calls<\/a> it an \u201centrepreneurial drought.\u201d<\/p>\n An economy that fails to create a steady flow of entrepreneurs is destined to stagnate. Sustainable growth requires steady disruption from new ideas and new technology, both of which generate wealth-enhancing productivity. The most reliable source of new ideas and new technology is new entrants. That\u2019s because various psychological biases and profit incentives cause incumbents to stick with what they know. It\u2019s the reason (I think) that Canada suffers from economic melancholy. Too many of our best companies are mature, oligopolistic behemoths that have lost their desire to invest, in part because they face little pressure from upstarts.\u00a0<\/p>\n The scale of Prime Minister Mark Carney\u2019s industrial policy will generate economic growth in the short and medium term. But to keep the flywheel turning, he\u2019ll need a new wave of entrepreneurs to take advantage of the wake created by all that spending. The CFIB dislikes<\/a> the federal government\u2019s emphasis on big projects backed by big funds. Its preferred approach<\/a> to entrepreneurial drought relief includes cutting the federal preferential income tax rate for small business to six per cent from nine per cent, and all provincial rates to zero; raising the amount of profit that applies to that lower rate to $700,000; and cutting regulation, which the federation says forces small businesses to spend a month\u2019s worth of work hours each year just dealing with red tape.<\/p>\n I like how the CFIB has brought attention to the entrepreneurial drought and I agree that it\u2019s a blind spot in Carney\u2019s plan to revive the economy. But some of those policy ideas sound like they\u2019re designed to benefit its existing members, not inspire those with good ideas to start new companies.\u00a0<\/p>\n I bailed on farming before anyone let me near a balance sheet, so maybe I\u2019m unqualified to judge, but I\u2019m skeptical that policy is the reason that Canada is struggling to create new businesses. I think it\u2019s deeper than that. The root cause is culture.\u00a0<\/p>\n The latest<\/a> Global Entrepreneurship Monitor found that Canada has seven of 13 \u201centrepreneurial framework conditions,\u201d fewer than places such as Estonia and Finland, but more than a handful of countries that are famous for their startup cultures, including the U.S., Israel and Sweden. The first of the CFIB\u2019s two reports on the entrepreneurial drought includes survey data that suggests individual Canadians are more inclined to start a business than their American cousins. But the U.S. economy is more dynamic because too many Canadians are afraid to act on their aspirations: half of us say fear of failure would keep us from starting a company, compared with 42 per cent of Americans.\u00a0<\/p>\n Now, combine a deep sense of risk aversion with the drumbeat from the CFIB and others about how hard it is to be an entrepreneur. Some 55 per cent of the federation\u2019s members said last fall that they wouldn\u2019t recommend starting a business. That\u2019s the kind of negativity that drove me off the farm.\u00a0<\/p>\n Michael Buhr, the head of C100, a club for Canadian entrepreneurs and investors in Silicon Valley, doesn\u2019t think the issue is taxes or capital or regulation. Those are just obstacles. His experience<\/a> suggests that what entrepreneurs lack most are role models\u2014real-life evidence that a Canuck with a dream can start and scale a company. \u201cThat takes more than capital. And more than one-day conferences where we get inspired and go home,\u201d Buhr wrote<\/a> on LinkedIn. \u201cScaling is learned over time\u2014by surrounding our highest-potential founders with people who have actually done it.\u201d\u00a0<\/p>\n That\u2019s not woo-woo stuff from some guy who\u2019s been living in Silicon Valley too long. Entrepreneurship is calling, but the call isn\u2019t enough. It\u2019s well established that most of us need to see what\u2019s possible before we leap. Daniel Coyle, author of The Talent Code<\/a>, calls it ignition<\/a>. He determined that what separates the greatest talents from the merely talented was deep, dedicated practice. But something has to click before elite performers dedicate themselves to that extra work.\u00a0<\/p>\n There were 15 Russians in the Women\u2019s Tennis Association\u2019s Top 100 in 2007, compared with three a decade earlier, Coyle noted. What changed? For one thing, dozens of talented girls watched a 16-year-old Anna Kournikova make it to the semifinals of Wimbledon in 1997. \u201cWhen we get a cue that we ought to connect our identity with a group, it\u2019s like a hair trigger, like turning on a light switch,\u201d Stanford psychologist Geoff Cohen told Coyne. \u201cThe ability to achieve is already there, but the energy put into that ability goes through the roof.\u201d<\/p>\n In his LinkedIn post, Buhr proposed creating a \u201cTechnology Company Growth Leader\u201d that would be charged with dramatically increasing the number of Canadian-based growth companies. He\u2019d do it by gathering a select number of companies in a network and surrounding them with established founders, executives and investors for a nine-month period. No tax cuts. No subsidies. No complaining about regulation. Just advice and moral support. <\/p>\n Buhr acknowledged that it might sound like he\u2019s pitching a souped-up version of C100, but he insisted he isn\u2019t empire building. \u201cWe have the talent,\u201d he wrote. \u201cWe have experienced Canadians around the world who want to help. We know how to do this.\u201d\u00a0<\/p>\n So let\u2019s do it. Before it\u2019s too late.\u00a0<\/p>\n Kevin Carmichael is The Logic\u2019s economics columnist and editor-at-large. He has spent more than two decades covering economics, business and finance for outlets including Bloomberg News, The Globe and Mail and the Financial Post, where he also served as editor-in-chief. <\/p>\n","protected":false},"excerpt":{"rendered":"I grew up on a farm in rural New Brunswick. 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