Two Kinds of Capital — And Only One of Them Is Ours to Direct

Last week, roughly a hundred of the world's largest investors — collectively overseeing something in the neighbourhood of $120 trillion — landed in Toronto for the first Canada Investment Summit. The ambition on the table was to realize $1 trillion in investment over five years. It was a meeting designed to lure capital to our country to build things.

Photo by Rebecca Ritchie on Unsplash

Watching it unfold, I felt two things at once. Firstly, encouraged, because Canada rarely gets this kind of attention, and attention is not nothing. Secondly, a little uneasy, because attention for the wrong reasons can be a bad thing.  Money showing up is not the same as money contributing in ways we actually want.

John Ruffolo put words to that unease better than I could, in a piece he published days after the Summit wrapped. His analogy was: government's job is to clear the field, build the roads, protect property rights. Capital is the sun and the rain — it doesn't plant anything, but nothing grows fast without it. The one thing capital was never meant to do is choose the crop. That choice belongs to the farmer. Our best farmers are the small and medium-sized businesses in Canada. 

There are two kinds of capital that can support Canada at this time, and they behave nothing alike.

The first kind follows a decision that's already been made. A Canadian business identifies where its real opportunity is — a new market, a new buyer, a new use for what it builds well — and capital moves in behind that decision to grow it faster. The business stays in the driver's seat. The upside stays in Canada.

The second kind arrives first and decides for us. It sees an undervalued asset, acquires it, and directs it toward whatever serves the capital's agenda rather than the country's. Control moves wherever the head office is. We can call that investment too, and technically it is, but it's not the kind that compounds for us.

For Canada to come out ahead at this moment, we need our SMEs to plant new fields. Find the places where new Canadian-controlled enterprises can grow.  The uncomfortable truth is that most Canadian small businesses right now are stressed at a time when we need them to actively identify new opportunities and make important choices. 

This is where economic development agencies have a role to play.  You're the closest thing most small and mid-sized Canadian businesses have to a partner who can help them do that choosing. Before the capital shows up looking for something to buy, not something to build.  Research, grants, secondments, introductions, but most importantly, the time and space to bring in expertise that helps a business identify its real next market.  This is the kind of support that turns a company from something capital acquires into something capital grows. 

That's work we do a lot of at OCAD U CO, working with companies to identify those new fields using customer research, consumer trend analysis and innovation methods.  We're reaching out to agencies every day and welcome these conversations about how we can help. 

The farmer still has to choose the crop. Our job, collectively, is to make sure they get the chance to.