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A riposte to Balsillie

March 25, 2016
Neil Milton

Just because you are wealthy does not mean that you are wise.

Another week, another rant from Jim Balsillie in the Globe & Mail about the Transpacific Partnership (TPP).  You can read the latest one here.

Mr. Balsillie believes that the TPP is a terrible deal for Canada because it includes a requirement for all countries, Canada included, to ‘strength’ their protections of intellectual property rights.  In essence, his arguments that this is a bad idea for Canada are:

  • The United States wants increased IP protections, so therefore this must be a bad deal for Canada.
  • Canada has not been as successful as it should in the past at commercializing innovations, and therefore it will suffer in the future in a world of increased IP protection.
  • And then some mish mash of arguments I don’t understand to the effect that it is all the fault of the government for not having good innovation policies.

Being Canadian does not mean being anti-American.

The first argument is idiotic, and I will not respond to it other to note that reflexive anti-Americanism is as annoying, dangerous and wrong as reflexive ugly US patriotism.  There is nothing wrong with being a proud Canadian, but there is a lot wrong with being irrationally anti-American.

Past mistakes and future confidence.

The second argument is plausible in one form, and horrible in the other.  If the argument is that the benefits of increased future IP protection will accrue to past innovators, then there is a significant measure of truth to that argument.  This is the “Why give a gift to Walt Disney?”  argument.   It has some merit, but it is a relatively short term gift, with a few big exceptions (Oracle, SAP, Microsoft in particular being beneficiaries of longer copyright protection).

On the other hand, if the argument is that Canada will not commercialize innovations enough in the future to benefit from stronger IP protection in the future, then the argument is incredibly defeatist, and I certainly hope that it is wrong.  I am not naive, but apparently I am more confident about the capabilities of Canadians than Mr. Balsillie.  The brutal truth is that I think that is actually a generational issue – older Canadians are much less confident about Canada’s ability to compete than younger Canadians, and older Canadians are definitely more afraid of the Americans.  Me, I am afraid of places like China and Russia, both of which have truly evil autocratic rulers.

In any event, surely we have to start with the confidence that Canadians can compete fairly with the Americans going forward.  When it comes to future innovation, if Canada has a problem, the focus should be on fixing Canadian commercialization not opposing the TPP because it might also be good for the US

Policy does not create innovators.

The third argument, that it is the government’s fault, is dead wrong.  The US is not successful at commercialization because of its government – in almost every respect, the US is successful in spite of its governments, which are almost comically bad at every level and have been for quite some time.

Commercialization is really hard.

Here are some truths about commercializing innovation:

  • It is incredibly hard work.
  • It takes a long time.
  • It is very risky.
  • Luck plays a huge role – so even if you do everything right, you can still fail.

Government policy can help improve the odds of success, but no government policy, no matter how good, can drive this process.  Entrepreneurs need to drive it.

Brutal truth: Canada has not had a lot of commercialization because it did not have a lot of tenacious entrepreneurs.  In the past 20 years, places like Israel and South Korea have had lots more highly motivated (desperate?) people per capita than Canada.  That’s the nub of the issue.  And, Canadians get the innovation policy they deserve.  If Canadians thought our innovation policies were broken and should be fixed, they would be fixed.  We don’t suffer from stupid or wrong headed government – we have the innovation policies we do because because people don’t care enough to fight for changes.

Lots of university research and not enough commercialization?  The cause is not enough entrepreneurs willing to endure the pain and misery of trying to get a venture off the ground.  Why might that be the case in Canada?  Because most Canadians, and especially Canadian researchers (most of whom are university professors or government employees) don’t want to give up what they have, which is pretty good, for the alternative, which is guaranteed to be painful risky and long.  That may be bad for the country, but it is rational for the individuals.

Want more commercialization of research in Canada?  Pay post-doctorate students and young professors much less, and stop giving them pensions.  That would make Canadian universities a harsher environment – more like MIT and less like McGill – but it would change the pace of research commercialization more than any other government policy I can think of.

Low oil prices are the best hope for more innovation.

Low oil prices are likely to have a bigger impact on Canadian innovation that any government policy, although an Alberta government policy to reduce carbon emissions from oil extraction will also help.

Almost no one will endure the pain of innovation when they can make more money more easily without innovating.  In Canada, for generations it has been easier to make a good living cuttin’, diggin’ or killin’ than innovating.  Now, if a lot of Canadians need to do something other than just the same old natural resource extraction to earn a first world income, some of them will get busy innovating.  If the price of oil does not rebound quickly, they will have the need and incentive to keep fighting through the grief until they succeed.

In a world seeking to balance low oil prices and lower carbon emissions with a sustained and growing need for energy, the potential for innovation in Alberta aimed at reducing the cost of extracting oil and reducing the carbon emissions from oil extraction has received a tremendous boost.  Lots of companies in the oil sands and fracking industries might be on death’s door – but the resources themselves will not die,  and it is innovation that will give them a new lease on life as cleaner, cheaper and better sources of energy.

 

Is stronger IP really a good idea?

My complaints about Mr. Balsillie’s attack on the TPP are with his arguments, which I think are unpersuasive, and reflect a lack of realism and confidence.

However, shocking as it may be, I am actually not convinced that stronger IP protections are a good idea, whether in the TPP or otherwise.  Yes, it may be heretical for an IP practitioner to say it, but there is actually no solid evidence (at least that I am aware of) that says increasing IP protection beyond what we have now will create more innovators or innovation.

The argument that “more IP protection = more innovation” is as weak as “longer prison sentences deter crime”.  It is sloganeering, not evidence-based policy.

Will extending copyright and patent protection by a few years increase, decrease or have no material effect on innovation?  The only honest answer is that we do not know because there is no empirical support for any of the three answers.  My guess is it will have no effect that can be distinguished from the myriad other variables at play.

Neil