Jim Balsillie has emerged from retirement with a mission to save Canada's tech sector - Macleans.ca

Jim Balsillie has emerged from retirement with a mission to save Canada’s tech sector

He’s launched a battle against Sidewalk Labs, troubled at the prospect of the world’s largest data company having free reign over Toronto’s waterfront

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Jim Balsillie (Photograph by Jaime Hogge)

In February, when the Toronto Star and the National Observer both published confidential planning documents prepared by Sidewalk Labs, critics pounced on the revelations about the ambitious project’s scale. For over a year, the Alphabet/Google smart-city subsidiary, and Waterfront Toronto, the agency managing the project, insisted it would be limited to a 12-acre parcel of land called Quayside near downtown Toronto. The documents, however, suggested that Sidewalk’s plans extended to a sprawling and mostly fallow dead zone known as the Port Lands. (The company said they were preliminary.)

But the leaked presentation included another intriguing morsel—one that generated less reaction yet revealed much about how the company, headed by former New York deputy mayor Dan Doctoroff, views the controversy that has dogged its plans since they first became public in October 2017.

According to the media accounts, a slide entitled “Shaping Public Opinion” included this chestnut about the media’s treatment of Sidewalk’s plans: “The majority of the negative press coverage,” it said, “is rooted in an anti-global-tech-giant narrative being spun by former RIM co-CEO Jim Balsillie and disseminated through the Council of Canadian Innovators” (the tech business council that Balsillie chairs).

It was an impressively paranoid assessment, but one not far off the mark.

READ: Google’s Sidewalk Labs project in Toronto is already creating jobs—in New York

The man who appointed himself the ghost in Sidewalk Labs’ machine doesn’t quite belong in the pantheon of supernova tech celebrities like Steve Jobs or Mark Zuckerberg. But as co-CEO of the firm that invented smartphones, Balsillie qualifies as bona fide tech-industry royalty and a household name in Canada. Of course, he was also at the wheel of the Waterloo hardware giant when it was aggressively dethroned, first by Apple and then by the other electronics manufacturers that built devices around Google’s Android operating system.

Since stepping aside in 2011, Balsillie has tended to his think thank, the Centre for International Governance Innovation (CIGI) and dabbled in pet projects, such as the Harper government’s quest to find the shipwrecks from Sir John Franklin’s expedition through the Northwest Passage. (BlackBerry, meanwhile, has reinvented itself as a profitable network security company.)

In the past 20 months, however, he has emerged from retirement, full of righteous indignation informed by a tech-y variation of economic nationalism.

Balsillie has inserted himself into the middle of a high-stakes fight that involves domains—land use planning and municipal government—he’d never pondered.

But the prospect of the world’s largest data company having virtually free rein to use Toronto’s waterfront as its testing zone for data-gathering technology—and doing so while Europe is seeking to limit the power of Facebook and Google—grabbed his attention. As he says, “I was taken aback that we would, without proper expertise, capitulate and give that much power to a foreign firm, just as the rest of the world is pushing back.”

Today, Balsillie—together with a small army of emissaries—is using the Sidewalk Labs melodrama as a cudgel with which to bash the Trudeau government’s “innovation agenda,” the centerpiece of the Liberals’ jobs and investment strategy. (He was named in early April as a technology commercialization advisor to Ontario’s Tory government.)

The federal Liberal’s innovation plan includes hundreds of millions for venture capital funds, “superclusters,” academic research, R & D tax credits, as well as policies such as fast-tracked visa applications for international graduate students (the latter was Ottawa’s way of exploiting the Trump administration’s xenophobia). Trudeau himself loves to schmooze the technorati, and was unusually visible when Sidewalk made its splashy debut in October 2017.

The Liberals’ innovation plan targets tech communities in Toronto, Waterloo, Montreal, Vancouver and Edmonton—a subculture that includes venture capitalists, artificial intelligence gurus and all those millennial tech entrepreneurs who (to Balsillie’s dismay) dream of selling their startups to U.S. behemoths like, well, Google.

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Balsillie has personally expressed his concerns to both Trudeau and Navdeep Bains, the minister of innovation, science and economic development. While he lauds Bains for being willing to talk, Balsillie still believes that much of what the government is doing simply misses the mark. “Here we are in 2019, and we still don’t have an innovation strategy.”

Balsillie has waged his two-front battle against Sidewalk and the Liberals’ innovation policies from a secluded and sprawling compound in a hilly, rural area north of Guelph, Ont.—a spot about equidistant from the tech hub in downtown Waterloo and its counterpart in downtown Toronto.

One damp, grey day in mid-March, a small bulldozer trundles around the muddy property, much of which is under construction. Inside the main house, Balsillie is perched on an elegant couch in a spacious living room, a late-model BlackBerry—of course—resting quietly next to him. A profusion of collector-grade art, including some Group of Sevens, adorns the walls.

While he likes to lob rhetorical grenades—in one op-ed attacking Ottawa for having no national data strategy, he dismissed federal government mandarins as “colonial supplicants”—Balsillie cuts an attentive, courteous figure. Yet he is clearly accustomed to having an audience, referring frequently to keynote speeches he’s given at elite talk shops such as Davos.

The core of his critique is the contention that if Canada is to thrive in the tech economy, it needs to do way more to control the ideas—inventions, discoveries, data, etc.—that represent the natural resources of the future. Balsillie points out that upwards of 90 per cent of the trillions in wealth represented by the S&P 500 companies is built on “intangibles,” like patents. Two generations ago, that figure was just 16 per cent. “Has our policy apparatus shifted [in response]?” he asks rhetorically. “The answer is, it hasn’t. Yet the world has seismically changed.”

If Canadians don’t own their intellectual property, he warns that others will fill that void, condemning us to the 21st-century version of the old gripe about Canada as a branch-plant economy.

Balsillie has systematically assembled a brief that suggests the future is cloudy. Compared to other OECD countries, Canada is falling behind in the number of AI patents it registers. Universities let foreign companies exploit the inventions created in government-funded labs. And multinationals soak up more than half of federal innovation grants. “The statistics are just overwhelmingly persuasive,” he says.

Intellectual property (IP) has been on Balsillie’s mind for years. When he ran RIM in the 2000s, he travelled constantly, making sure the company’s IP was locked down and protected in countries that turn a blind eye to patent theft. “Anyone growing a tech company is extensively involved in public policy,” he says. “I learned that.”

READ: Cracks in the Sidewalk

He also learned how “predatory” Silicon Valley is, a fact of life that Waterloo tech firms battled for years as they watched young engineers decamp for pastures that were greener in every way. (Ironically, RIM’s demise as a smartphone powerhouse proved to be a remarkable catalyst for the Waterloo region’s tech sector, as many RIM veterans chose to stay and start companies.)

After leaving RIM, Balsillie kept a watchful eye on the policy-making apparatus in Ottawa. Like many high-profile businesspeople, he saw the capital as an echo chamber, with the same people constantly telling one another the same things in the same ways, all of it solidifying into policy.

One leitmotif had to do with corporate Canada’s chronic under-investment in R & D—an old grievance, but one, he felt, that missed the point. “There were all these panels and reports coming out of Ottawa,” Balsillie says. “The way they described it didn’t fit my experience in the world.” In countries like Israel, Switzerland, Germany and Korea, he’d met policy-makers who understood the importance of securing domestic IP. His warnings, however, fell on deaf ears.

Balsillie’s radicalization occurred six years ago, when he found himself at a tech conference listening to a speech by an extremely senior civil servant. This individual—Balsillie won’t name names, but the speaker was Kevin Lynch, Stephen Harper’s then-deputy minister (and now chair of the SNC-Lavalin board)—was going on about how the federal Tories had put in place the right policies to kick-start innovation following the collapse of Canadian tech giants like Nortel. “It’s time for the business community to step up,” Lynch said, wagging a rhetorical finger at his audience.

Balsillie was beside himself. “That was my Martin Luther moment.

“We have created the disadvantageous conditions for innovators, and when they don’t perform, we declare them to be inadequate. These entrepreneurs are successful in spite of the policy, not because of it,” he says.

Four years later, as he watched Trudeau cozy up to the top executives from Google and Sidewalk, Balsillie realized he had a golden opportunity to illustrate just how muddle-headed Ottawa’s thinking had become.

Indeed, in the age of Cambridge Analytica, fake news and the enveloping power of vastly profitable tech multinationals, Sidewalk could be readily rendered as a corporate villain plucked right out of central casting.

Sidewalk Labs proposed Area 1 and Area 2 of Portland development. (Andrew Francis Wallace/Toronto Star/Getty Images)

It would be wrong to suggest there’s a single solution to the problem of how to promote innovation, or that Jim Balsillie has the right answer. Governments can’t decree ingenuity, nor can they ensure the complex conditions needed to commercialize game-changing technologies.

Some people think the key is to create spaces where smart people share ideas. Others talk about industrial clusters, because magic happens in regions that attract investors, researchers and companies. Many Canadian universities and business schools are betting heavily on entrepreneur training camps, incubators and accelerators—a popular idea for which Balsillie has no patience (he derided the trend in a recent article in the Logic as the “incubator-accelerator industrial complex”).

The conversation, moreover, has shifted with the astonishing rise of data-driven companies that depend on algorithms and software rather than hardware and subscriptions. Mark Fox, a professor of computer science at the University of Toronto who launched and sold two AI companies, points out that in the current economy, open source software has become a more important driver of innovation than the patents of Balsillie’s day.

Fox adds that successful innovation-driven firms are exceptionally good at the less sexy work of management: selling, marketing, smart hiring. Still others stress that Ottawa’s got a lot of legislative slogging to do if it genuinely wants to attract investment and produce more world-beating tech firms like Shopify.

Law professor Teresa Scassa, a University of Ottawa IP expert and a member of a Waterfront Toronto committee bird-dogging the Sidewalk project, says Canada’s copyright, data protection and privacy laws are not only out of date, but lack the robustness to allow homegrown AI firms to thrive.

Echoing Balsillie, Scassa says Canada has fallen behind Europe and may also be vulnerable to obscure IP provisions in the new U.S.-Mexico trade deal. Many of these gaps, Scassa adds, allow Sidewalk to test the smart-city technologies it wants to sell around the world, and to do so without worrying too much about laws that might tie its hands. The project “has become such a good example of so many things,” she says. “There’s this constant flow of issues we need to think about.”

Balsillie has been far more blunt with the officials overseeing the Sidewalk proposal: With the global smart-city market worth over a trillion dollars, and its growth driven by data, algorithms and smart sensors, Canada, he predicts, will watch helplessly as Alphabet, with its army of lobbyists and publicists, makes off with all the exceptionally valuable IP generated in Toronto, while dictating the rules allowing this massive exodus of innovation to occur. “We picked the vendor before the framework,” he states. “One slip of the pen and the whole thing is gone.”

In response to criticism from Balsillie and others, Sidewalk and Waterfront Toronto officials have repeatedly stressed that the project will adhere to Canadian privacy laws and any data their systems generate will be managed by a yet-to-be-established public organization with a mandate to ensure security and equitable access.

Sending me off with an armload of documents and articles to read, Balsillie evidently intends to continue making sure that Canadians, and Canadian policy-makers in particular, will hear the warning he’s nailed to the proverbial door.

While his guerilla-type attack has caused much consternation at Sidewalk’s New York head office and in Ottawa, Fox says Balsillie has earned the right to make his case. “To get a heightened degree of awareness, you have to speak loud.”

And so he has: “I called them out sharply,” Balsillie muses, smiling slightly. “They didn’t like that. But boy oh boy, did that get them moving.”

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