Indeed, the banks suffered only one serious setback, when Finance Minister Paul Martin said no to mergers in the 1990s. Even that loss was a kind of triumph. Their absence from the big mergers, plus a more stringent Canadian regulatory climate, protected Canada’s institutions from the worst excesses of size and hubris that capsized global banks in the financial meltdown of 2008.
The meaning of Nortel
The banks benefited greatly from the globalization of the past 30 years, epitomized by the signing of the Canada-U.S. free-trade agreement, later extended to Mexico. In the long-simmering debate between nationalists and free traders, the free traders seemed to win – for a moment. They argued that free trade actually liberated coddled national champions, giving them licence to thrive in foreign markets.
No company carried those hopes more boldly than Nortel, a stodgy supplier of telecom gear as part of the supply chain of monopoly phone company Bell Canada. Cut loose from Bell, propelled by the Internet and global expansion, it became an acquisition machine that paid its bills in soaring stock. In the mad markets of the late 1990s, Nortel become the most valuable company in our history with a market capitalization of almost $400-billion.
For one brief moment, Canada dreamed of its own technology champion, but Nortel then became its most spectacular collapse, as it plummeted into bankruptcy protection and dismemberment. It was not a lack of engineering or technical talent that ultimately killed Nortel. It was the desire of otherwise sober accountants, engineers and technicians to score like windfall-era mining promoters. The speculative culture of the boiler rooms extended to Internet startups and even to venerable telecom players.
Are we seeing the same sad saga replayed with RIM ? For a while, it too embodied the great technology dream, as Waterloo, Ont., became our Silicon Valley, where startups clustered around a university built on mathematics and computer science. RIM was also part of the relentless miniaturization of technology. One front page in early 1962 proclaimed that computers would progressively decline in size, as they blossomed in functionality. The accompanying photo showed a device the size of a bathroom, suggesting more work needed to be done. Then RIM reduced an array of office functions to a pocket device called the BlackBerry, the brand of choice of global corporations.
But success is fleeting in the high-tech world, built on nimble minds and imagination, not a certain store of oil or gold in the ground. By the end of the first decade of the 21st century, RIM was under attack by new generations of smartphones. It was not a crash like Nortel’s but a steady, dramatic erosion of market share. It resurrected the old chorus: We develop great technology, but can we commercialize it to lasting advantage?
If only the speculative spirit of Nortel and Bre-X could be channelled into a brazen brio for building companies. We need more heroes in the fashion of Ted Rogers, who never invented a thing but constructed an enduring enterprise by taking smart bets on the commercial application of new technology – from FM radio to cable TV to wireless.
The challenges of innovation and technology become more complex in an era so utterly dominated by China and by commodities, which drive up the value of our dollar. It is a perplexing paradox because Canada is one of the world’s most prosperous countries. But as Ontario and the East falter and Alberta and Saskatchewan flourish, we are still searching for an answer to the historical dilemma: Does this have to be a zero-sum country where one region, one sector, one group, prospers while others feel so abandoned? That tension dominated the first 50 years of Report on Business; with the geographical tables so decisively turned, it shows no signs of abating.