The Canadian Growth Agenda: A Prescription for Canada's Long-Term Economic Growth

The Empire Club Presents

Dominic Barton, Global Managing Partner of McKinsey & Company

With

The Canadian Growth Agenda: A Prescription for Canada’s Long-Term Economic Growth

Welcome Address, by Barbara Jesson President of Jesson + Company Communications Inc. and President of the Empire Club of Canada

November 17, 2017

Good afternoon, ladies and gentlemen. From the Arcadian Court in downtown Toronto, welcome, to the Empire Club of Canada. For those of you just joining us through either our webcast or our podcast, welcome, to the meeting. Before our distinguished speaker is introduced today, it gives me great pleasure to introduce our Head Table Guests. I would ask each guest to rise for a brief moment and be seated as your name is called. I would ask the audience to refrain from applauding until all of the Head Table Guests have been introduced.

Head Table

Distinguished Guest Speaker:

Mr. Dominic Barton, Global Managing Partner, McKinsey & Company

Guests:

Ms. Nancy Barber, Vice President, Program Management – Global 7000/8000 Program, Bombardier Business Aircraft

Ms. Megan Boyle, Director, Public Affairs, Red Bull Canada; Director, EmpireClub of Canada

Mr. Victor Dodig, President and Chief Executive Officer, CIBC

Mr. Jim Goetz, President, Canadian Beverage Association

Mr. Chris Halyk, Chief Executive Officer, Janssen

Mr. Naheed Kurji, President and Chief Executive Officer, Cyclica Inc.

Mr. Colin Lynch, Senior Vice President, Strategy and Growth, Greystone Managed Investments Inc.; Director, Empire Club of Canada

Mr. Stefan Schmidt, Senior Director, Engineering & Methods, Bombardier Business Aircraft

Mr. Harry Seymour, Past President, Empire Club of Canada

I am Barbara Jesson, the President of Jesson + Company Communications and the President of the Empire Club of Canada. Ladies and gentlemen, your Head Table.

In a world where the term ‘consultant’ is sometimes a euphemism for looking for work, our guest, today, stands at the very pinnacle of professional excellence. I think we frequently forget that the service sector in which his business plays such a seminal role currently represents about 71% of Canadian GDP. The point I am making is that our economy has seen a dramatic shift from natural resources and manufacturing, and the evolution in the sources of our productivity continues. Despite this, most people in Canada, I think, continue to believe that our biggest opportunities for development lie in manufacturing in the high-tech industries and our natural resources. Both, of course, are critically important, but it is something of a mystery to me that we continue to measure success and innovation only in patents or funding for hard science and technology.

Many countries in the world are making considerable progress into innovation in the service sector, changing their approach to create balance between technology, R&D and service innovation. Today, I hope to learn from our guest speaker, who is a leader at the very highest echelons of the service sector and a key advisor to our government, some of his thoughts on how Canada’s service economy can innovate and evolve for future growth.

Here to introduce our guest speaker is Mr. Victor Dodig, President and Chief Executive Officer of CIBC.

Introduction, Faisal Kazi, President and Chief Executive Officer, Siemens Canada

Thank you, Barbara. Welcome, everyone, to the lunch. Welcome, Dominic, to Toronto. It is a real privilege and honour, personally, to be introducing Dominic. I have known him for almost 25 years. Coming out of business school, just before I graduated, I was interviewing at McKinsey & Company and coming up from Harvard Business School, and I said I want this job at McKinsey. McKinsey required unanimity from everyone that interviews you to say you are in.

I met Dominic. Dominic is unique. He is unorthodox in his thinking. He is incredibly intelligent and incredibly self-effacing. I recall the interview. He asked, “Why do you want this job?” He almost threw me off my feet. He has that way about him to make people think in a different way. It is something that I have admired about you for a long, long time. It has been a consistent theme of yours, this ability to contribute and this ability to care. While I never worked on a study with you, together, you always, while I was there—and I was only there for three years, but they paint you with the McKinsey brush for the rest of your life, which is a good thing—you would always pop in and say, “How is it going? What can I help you with? What are you trying to solve for?” That is the type of person that you are. You are a caring, intelligent individual. I see you as Canada’s gift to the world and a great patriot of Canada. We do not use the term ‘patriot’ enough in our country. It is in our national anthem. He is a patriot. He is an economic patriot. He cares deeply about our country. He has, obviously, done well in life. He is highly educated, a Rhodes Scholar.

He joined McKinsey over 30 years ago. I think his notable accomplishment since when it was not in vogue is that he went to Asia; he went to Korea; and he went to China and built McKinsey’s practice up into a significant force in that part of the world, which is now noted by everyone, as he is the Global Managing Partner of the firm, and, I guess, at some point soon, you have to step down.

The only thing with the McKinsey election process for global managing partners is that it is probably almost as secretive as the papacy in terms of who might it be. Four people were mentioned in the Financial Times recently. I will not go there. I know one of them because I used to work with one of them when I was there, and it is a very smart person as well.

I think when it comes to patriotism, Dominic has surely shown his stripes here for Canada in agreeing to chair the government’s Advisory Council on Economic Growth. It is something that we all need to be thinking about. How do we take the family business of what we have been endowed with, the natural resources of the past and look to the future and the reshaping of technology and trade and open borders? And how do we make Canada stand not only as a political beacon in the world, but an economic beacon in the world? There is no better person to address that topic, today, than my friend, Dominic Barton, who is both a capitalist and a human with a social conscience. I think you will see all of that come through and the necessary patience to build the country that we want as he talks about the long term. Welcome to Toronto, Dominic.

Dominic Barton

I think we are done. Victor, you were so wonderful. You could see one of my many mistakes was not being able to retain Victor in McKinsey. It was very difficult to try and hire him because there were so many people that wanted him, and then to retain him. It is an honour to be introduced by you.

It is wonderful to be here. What I was planning to do is speak for 20 minutes or so. Unfortunately, I have some slides, so I apologize for that up front, but that is just the way I try to make sure I am on message with communication just in terms of where we are. And then, if there is time, I will answer any questions and listen to your input. I also want to recognize my Growth Council colleague: Ilse, if you could stand up. I know you do not like to. Ilse is here as well. She is just like the rest of the team. It is an amazing team, and she has been pretty intense, I guess I would say, for the last 18 months or so, but there has been just a commitment to try and find ideas and to leverage the great ideas that are already out there to move it forward. Ilse will throw a glass at me if I go off piece on this or intervene, or I may ask her to.

I just wanted to go through this fairly quickly, but the bottom line is what Victor was saying about how we have this incredible endowment in terms of our resources and our talent, and, considering the size of the country that we are and our positioning in the world, literally, geographically, we better use it or lose it. We are going to have to do some things that cannot be done overnight to be able to position ourselves to do that. What we have focused on is some of the long-term shifts that we can do to ensure that, in a sense, this is Canada’s century as we go ahead. We can do it because we have got all the ingredients. My thought experiment, personally, which I always do since living in Korea, is imagine if Korea owned Canada what they would do with it. What that country has done with practically nothing is unbelievable.

If we just put a bit of that ambition into the system, I think we could really move the needle.

Just three quick parts for the context. I do not want to spend a lot of time on that because I think you know better than I do the recommendations to date, and then what we are literally working on right now is the next wave of them. We are basically focusing on business investment and skilling, which we think are two critical topics. I will probably spend more time on this one than the previous ones just because of the complexity of it and so forth. We will take you through the findings on that. I think, again, we have many strengths. I am not going to walk through them.

In terms of the challenges, there is one in particular I want to point to, which is around the aging population. This is the one that worries us the most, the demographics, because we have been blessed for the last 50 years with a fairly young population, with women coming into the workforce, with immigration. That tailwind is now becoming a headwind as we look at the next 50 years.

Then, we have a fundamental productivity challenge that we have had for quite some time. I think there are some excuses we can use in that we are a small population spread across a wide geography. In today’s world with technology, we cannot use that excuse anymore. There are some things we need to think about on that front. For the most part, we are incredibly blessed with what we have got to be able to win, we think, in this new world.

The challenge, just to put it out there, is, again, the aging population. Productivity growth really comes from labour force participation and the productivity of that labour force. We always underplay the importance of the size of the labour force. That has been a big chunk of what we have seen in terms of our productivity growth over the last 50 years. We are going to see a very significant drop if we do not do anything. We have got a headwind coming our way, which is imperative. The problem with these headwinds is they do not come overnight. It is a bit like the boiling frog. It is hard, politically, to deal with that because it can be someone else’s problem all the time. We can kick this can down the road. The problem is if we do that for too long, we are going to really hit a wall.

Just to put ourselves in comparison, we always think about Japan and Korea and all of these parts. Japan has already gone over the cliff. They are already dealing with this. If you think about our peer group countries that are out here, we are going to be more affected than anyone else that is out there. If you look at France, Germany, this is a particularly difficult issue for us as we go through it. Again, another way to look at it is working age to retired Canadians. Just look at those ratios, 7:1, 4:1, 2:1. That is not viable.

Hopefully, with automation, there is going to be some strengths that we are going to get benefits from that, but having workforce participation is something that is going to be very important as we go through it.

With the technology shift that is going on, I am actually not a luddite. I actually feel positive about the new jobs that will be created. What we are worried about on the Council, and this is an area that Ilse and Michael Sabia have been really pushing hard on, is are our educational systems ready for the scale and the speed with which we are going to have to retool ourselves? It is particularly for mature people, if I might say so. It is a polite way of saying ‘older people’. This is not just going to be about the young people coming through the system; it is the 40-year-olds to 55-year-olds. This is going to be happening around the world. Some people are beginning to experiment, but we do not think anyone has really addressed this. It is an order of like what pension reform was over 100 years ago, the idea that maybe you need to support people after they stop working. We are going to need something of that size to deal with it.

We also, as we looked at our diagnostic, if you will, about where Canada is based on a lot of work from others. We did spend a bit of time looking at where the tailwinds or the shifts are that are going on. Victor mentioned that Asia is a very big source of growth and opportunity for Canada, and we are not participating anywhere near how we should on that side. This is going to be net-net very, very good for Canada.

The technology disruption. We are all technology companies now. This is going to increase over time. We already think it is significant now, but, I think, as Larry Summers says, we are in chapter one of a 100-chapter book. For those of you who think about this a lot, I would say chapter one has been pretty exciting. Wait until we see where it moves. This is what I think is the single biggest force that is out there, the aging population. This is very significant for us, but also for the world as we go through it. Then, this notion of people searching for a new societal deal is a bit of a combination of these forces. There are a lot of people that are not benefiting. In fact, they are losing from all of these shifts and transitions that are going on, and they do not quite know why, but they are not happy about it. This is where we are seeing the populism and so forth. The trends are with all of these shifts that will get worse before it gets better unless we deal with it. As far as I can see, we cannot. There is no one who is accountable for doing that. We cannot sort of say, “Government, that is your problem.” It is a multilateral problem. We all have a role to play in that. If we do not fix that system properly, we are all going to pay the price of it. I do not think we have a lot of time on that front. Those are some of the forces that informed us as we looked at what we are doing.

Again, in terms of opportunities, we are going to have $20 trillion of annual consumption, primarily from Asia, by 2030. Just to satisfy those consumers on basic consumer needs, you are going to have to build 73 Procter & Gambles just in that region to do it. This is a very big opportunity. Whether you are participating in that market or supplying it, it is going to be critical to what you do. Natural resources, while we think about our services and the technology which we think are critical, let us not lose sight of the fact that we actually are endowed with very important natural resources for the future, especially, in agri-food, which has been an area we have been focused on. There is that PwC statistic that over the next 30 years, we are going to have to basically produce as much food as we have produced over the last 10,000 years combined. That is just to give you a sense of the scale of what we have to do. Having safe, high-quality food protein is going to be a very, very important business. It is surprising to me there is not a single Canadian company that is a global champion in that sector. The Netherlands has more than we have ever had in that sector. This is an area where I think it is an opportunity for us, like in many of the other places.

Education. This, we think, is going to become one of the biggest actual businesses, over time, given all the changes that are going on. I always remind people, again, for Australia, education, primarily post-secondary education, is their third largest export.

In terms of tourism, there are 110 million outbound travelers from China. When you actually look at the statistics on what people like, where they want to go, one of the top two places in the world, all the time, is Canada, but they are not participating like they could. I think it is, again, big business opportunities. Then, technology and innovation.

What we try to do is, again, when we are thinking about the ideas, just inform ourselves on where, if you will, the opportunity pools are for our country. We set a target. We wanted to improve median household incomes by $15,000 a year above the trendline. We used this just because we do not just want to throw around ideas. We want to have some target. We looked at a lot of other reports that had been done, and there is some amazing thinking. One, in particular—remember, Ilse?—we looked at was a Porter Commission work that was done, I think, in 1992. And it had just really big insights and views. One of the challenges, I think, is that there were so many recommendations, like 350. It is difficult to absorb that. We were saying let us set a target and force ourselves to prioritize on a few that are going to actually move the dial. We wanted it also to be inclusive. This is something that Bill Morneau really hammered on us. He said it is very easy to get GDP growth and have that just go to the top 1%. We are not that interested in that. We want that, too, but we make sure the median income also sees that.

We decided in our group early on we wanted to have basically less than 12. We thought there was no rhyme or reason; we just thought a dozen is a good number, but we did not want to have anymore than that, to just focus the prioritization through it. We wanted to focus as much as we can on the implementation. How could we get the government or other people to digest this? That became part of the focus of it.

Then, we thought we should—this is really a Mark-Wiseman view—release the recommendations in waves, like hockey cards. There is this notion or attitude of “Let us absorb them and then see what happens and learn as we go through,” and, again, we are drawing on a huge amount of really good thinking that is already out there. We are not trying to reinvent the wheel. That was kind of the approach that we were taking.

Let me just go through. There are eight recommendations that we have put in, and we are not doing our last two buckets. I do not know whether it will end up being three or five within that, but these are the first eight. One is the Infrastructure Bank and strategy. This was mainly driven by two reasons. One is we have about a $500 billion infrastructure gap in Canada when you think about our port facilities, our rail capacity, our pipelines, our technology infrastructure, the digital platforms that we need out there. We know that infrastructure is one of the single most powerful ways to drive productivity in a country in the short term and the long term. We have a lot of amazing pension funds, but they are investing a lot more in places like Chile, Brazil, Australia and the UK and not here. How can we leverage more private capital to go after that $500 billion bogey? That was one. That, now that the legislation went through, is the first infrastructure bank in the world. I commend the government, actually, in pushing that through because, politically, that is difficult when you have governments that like to do infrastructure because it is helpful in politics where you build certain facilities. We are trying to say there has to be some independence to this. We need infrastructure that is going to drive productivity, not vote-getting in the system. According to an FDI agency, Canada, compared to our peers, is punching way below its weight in terms of being a place where people like to invest and come in as foreigners, mainly because people do not know what it is they can invest in; they do not know who to go to; it is complicated with the provinces; and we think there is a very significant opportunity. This is not about foreign capital coming in to take over Canadian companies. It is actually about investing in Canadian companies, about investing in startups, about investing in R&D that is going on in universities. It is the broadest range of investment.

Immigration. This is one we felt very strongly about. We felt that we needed to make it much easier for high-skilled talent to come in. It is too painful for a lot of corporates in Canada to be able to get the talent that they want. A lot of people decide on where they set up headquarters by how easy it is to do it. Obviously, with what is going on in the U.S., we have an advantage that we should lever on that side. We are also pretty aggressive in terms of we wanted to crank up the economic immigration from 300,000 to 450,000 over a five-year period because we think we are going to need more workforce participation through it.

Innovation was a very significant part of our last set of recommendations. There were a bunch of pieces on this. One was really around, again, making sure we could get the talent here. We talked about innovation marketplaces, which were ways to get clusters of capabilities, universities, small businesses, venture capitalists, large corporates all working together to be able to drive commercialization and innovation.

The government has called them ‘super-clusters’. The thing we just want to keep emphasizing is that we are excited about what they are doing in terms of super-clusters; they want to make sure we do not lose the marketplace notion. There has to be private capital that is driving it, not public capital. We are excited by the nine finalists that are in the system.

Concerning the growth capital pools, we found a very big gap. Canada is actually extremely good at innovation. We are, literally, one of the top three countries in the world on almost every category in terms of idea generation. We have got wonderful research, but we are very poor at commercializing it. Dean is here, who does a lot on the venture-capital, angel-investing side. One critical area was the growth fund. I want to thank Victor. He does not like to take credit for these, but with the banks getting together to provide that capital for small institutions—and there is now a CEO and a Chair—that is actually moving with the $500 million, and I think it could go up to $1 billion, I think it is, Victor. There are a number of different areas in here.

The other one is strategic procurement. The Canadian government does not like to be a first buyer. That is actually really important for innovators when they move through it. In the U.S. and the UK, this is done all the time. There is a range of things on innovation that we felt were important.

Future skills. I will come back to this. Because the world is changing so quickly, we need some signaling device to know what those future skills are going to be and a way to experiment with new ways of training and reskilling people that we can use as we move ahead. It is a bit of a chip in a broader process.

In terms of sector growth, as I mentioned, with the endowment, we saw at least eight sectors where we think Canada should be punching way higher than our weight. This is the agri-food, the cleantech, healthcare and life sciences.

This is a way untapped sector for us. It is a huge source of growth. We are just not doing enough. This is not about subsidies. This is not about the government picking winners. There was a real antibody reaction to that type of thing. It was more about saying, “Let us put a spotlight on an area where we know by any reasonable benchmark we should be doing much, much more.” Why are we not? Are there regulations that are getting in the way? Are we not bringing all the resources that we need to, or are we just not being ambitious enough? Are people not seeing it? One of things I would like to note here is what the government has now called ‘economic tables’. They have set up six of them, and they are moving. One of them is on agri-food, which Murad Al-Katib is doing, and I was pleasantly surprised. I saw him in Vancouver this week. We said that there is at least a $40-billion jump that we can see in terms of the sort of performance in that sector. He was saying, “We think you are lowballing it. We think it is actually higher than that.” That is exactly what we want to have is people who are in the industry, if you will, who are looking at it and saying what is it that we need to be able to get there. I think we have actually lowballed the potential. There is a lot we can do there for growth and jobs.

Regarding workforce participation, as I mentioned, we have plateaued on women. We had a good push, but it has flattened. We need to crank it up again and make it easier for women to be able to participate. Indigenous people, as well, actually. We need to make that work. It is a huge source of talent, if we can make it work. It is not easy. There is an economic prerogative to do it, not just a moral prerogative to do it.

And concerning Canadians over 55, the government was not so excited about us trying to reverse the pension age reform. We think we are going to have to get more comfortable with older people working, given life expectancy and where we are.

The global trading hub is the notion that we are so focused on North America. That is great. We have got to do everything we can to try and continue that. We all know about NAFTA. The fact that we are so puny in these massive growth markets is just unacceptable for the future. We have got to have a free trade agreement with China, India and Japan. We have got to move on that front to be able to have the access to those markets. We are lagging behind our peers on that.

I am not going to go through all of these. We have actually been monitoring the implementation of this. The only thing I would say on the Infrastructure Bank is that we just want to make sure, again, that they pay people market rates. These are really critical institutions. You have got to pay market rates. We also want to make sure the governance is independent. We are excited. We have Jim Leach as a special advisor to the prime minister. I think he, too, is being paid a looney a year, but he is a tough son of a bitch in there, and I am glad he is there because he has high standards.

The FDI Agency is moving along very well in terms of the people. In terms of immigration, the government did not go to 450,000. I think the number of people in Canada probably are grateful that they did not go to our number on that side. We actually think that it is quite important in how we integrate people and move it through.

The one I want to finish off with is the last two which concerns what we are working on now, which is on business investment, where there is a very tight linkage between business investment and GDP per capita growth, productivity growth. What we found is, in Canada, we are underinvesting compared to the U.S. and, actually, to a lot of our peers, especially, when you put Australia on that system. We are investing less. We are investing less in capital, but we are also investing less in training for people. We think that is something that we need to—this area has been studied by everyone. We are asking, “What value are we going to add to this?” Our view is let us look to the future, not to the past, because there are going to be many growth engines, again, like life sciences, healthcare, agri-food. What is getting in the way? We think that, in this case, regulation, actually, gets in the way. You think about the innovation potential in healthcare because of the data that we collect on our populations, which is unique. Australia and the UK have that, but it is unique. The amount of innovation and commercialization that could be done is phenomenal, but we have a very rigid, too-tough system to be able to deal with that. We are saying we have got to have regulation that will protect people, but it has got to be more flexible, way more flexible. It has got to have a different mindset. We have seen it in fintech.

If you look at the Monetary Authority of Singapore, the central bank, the only communications I get from them are about fintech investments and how they have the regulatory sandboxes and they want to try and encourage the sort of large players that are in the country and the startups to be able to try things without fear of going to jail because they may break some particular rule. We are focusing a lot on what the future businesses that could be grown are and on what is getting in the way of that as we go through it.

We have many, many roundtables and discussions with business leaders. There are three challenges that people raise, and one is costs. Actually, the cost of input is a big issue. It is hard for us, I think, to be able to deal with things like construction costs. Regulation and taxes come up as very significant challenges as we go through it.

Again, for the sake of time, I am going to skip through. We think life sciences and healthcare have a tremendous opportunity for us, but our regulatory system gets in the way of that. We are looking to the past, not to the future, and where it is.

We are also looking at tax. Again, we are a bit nervous about delving into tax, given what the government has been going through in the last little while. Again, we are taking the view that last time a major review of the tax system was under the Carter review—right, Ilse?—which I think was over 30 years ago. There are actually a number of things that relate to software, IP, and so on, and we lag in those areas. We are not future-looking, and we want to make sure that the tax system is future-looking, because there are disincentives for ICT and software compared to other countries. It has also got to be competitive. We are looking at what is going on in the U.S. You have to respond. If the U.S. does something dramatic, we cannot just sit there and go, “I guess that is Donald Trump.” We have got to be competitive. We have got to be competitive on the corporate tax rate, and we have got to be competitive on the personal. That is what we are saying. Again, I do not know how the government will feel about that. We think we have to look at that as we look ahead.

Skills is the other one I mentioned. This is an area that we think is one of the biggest issues of our time, and too little is being done on it. Given the scale of the number of people that need to be reskilled over the next 15 years, we have got to get working on it now, or we are going to have a very big problem. We think somewhere in the order of 2–3 million Canadians who will be typically aged somewhere between 40 and 50 will be out of work if they are not reskilled properly. When you think about inclusive growth and so forth, it cannot happen. What we are going to find is that there are many unfilled jobs because we do not have the skills to do it.

We do not have the system to move it. We do already have a sense of where the growth is because there are a lot more new jobs in some skilled categories, but there are also a lot of jobs that are in declining categories. We could spend a whole luncheon just on the skilling side. I am just saying it is a very big issue, and we are worried, so we are spending a lot of time on that. We actually think that what we have had is basically two pillars: An education system and an unemployment system to be able to deal with this. This is something, again, that Ilse and Michael Sabia have been pushing, and a notion that we need a third pillar, which is around reskilling. It has to be at a scale that is way more significant than we have seen before for us to be able to go through it.

Again, governments are having to think very differently about what this means because we do not think it is tinkering with existing systems or plans, and corporates need to do this. Germany has got a very good set of programs that they are piloting in three of their employment agencies. Whereas it used to be about unemployment, now people go there to get advice on what sort of skills may be happening down the road and about where they fit and about what they can do. Very popular. A lot of people are participating in it. We think we need to do that probably in Canada, as well with our employment centres. It is about reskilling at the employment centres for what we need to do.

Singapore has done something. They are very worried about this. They are, obviously, much smaller, so they can do things more dramatically. In fact, one example, is that they have set up a lifetime education account that every Singaporean citizen over the age of 25 gets. You get 500 Singapore dollars. It is topped up every time you use it. It is only to be used for courses that they think fit with what the future is going to look like. There are experiments that are going on. We think it has to be done at a different scale.

I probably talked for too long, but I hope that just gives us a bit of a picture of the things we are doing. We are literally finalizing the last two buckets, which are around investment, which will be around regulation and taxation, and then around the skilling, which is about how we basically ensure that we have incentives for employers, employees and the government to spend the money that we need to. We think it is I guess probably seven times what the number is today in terms of order of magnitude that is going to be required.

Questions & Answers

Q: Great talk. One quick question on the reskilling: Where do universities play in that equation on re- skilling? I noticed you mentioned government agencies, but I would be curious as to how big or small of a role you think our post-secondary education system plays?

DB: Do you want me to maybe take a couple at one time? I find is a good way of doing it. That is a good one; I am not going to avoid it.

Q: You mentioned a lot about agri-food and Canada being well positioned. And just with water—how you see that as potentially as either an opportunity or constraint? You also mentioned the idea that often government procurement is not ideal as a first procurer. That can happen both at the federal and the provincial levels. How are you working on making sure that all levels of government are on board with a lot of these ideas?

DB: Excellent. On the university, it is a great question. I think, obviously, universities play a critical role, but I think universities are going to have to change some of the things they do. I think there has got to be more of a tighter linkage between the skills that are being developed and types of jobs. And universities are also there for the long term in terms of the research that goes on. I do not think we want to tinker or mess with that. We are emphasizing more on polytechnics. We, in Canada, do not, I think, give enough—we have a sort of cultural aversion to if your kid goes to a polytechnic. It is a very different model than what you see in Germany or Switzerland. I think we need to shift the community colleges. The polytechnics play a really important role in providing very practical, timely skills.

The third aspect is we have to change the way we do it. It has to be much more modular. People in this world are not going to be able to go away for three years to reskill, especially when you are in your forties.

You have a mortgage; you have a family; it has got to be part time; it has got to be affordable; it is probably going to have more online. We are seeing some amazing examples. AT&T has done this. Again, a hardcore capitalist, but Randall Stephenson is spending $250 million a year reskilling. He has done it with a university, Georgia Tech, with an Internet education provider, Udacity, and then he provides part-time education. It is sort of like two, three hours a week, and you get a medallion.

It is not a degree; it is a medallion. If you get the right number of medallions, you get the job. Those medallions are now being accepted by other companies. For example, for McKinsey, if you have an AT&T medallion in digital design, we will hire you. I do not care what university you went to, if you know what I mean. That is the sort of changes I think that we are going to have to look at. I think it has also implications for K–12. That is provincial. That is beyond our jurisdiction, if you will. I think someone has got to raise it because the idea that we teach people the same way we have been teaching people for the last 50 years as we look ahead probably does not make a lot of sense. Those institutions are quite challenging to change, I think. Anyhow, we think the education side is really important. We also think businesses need to step up more and train, and we are looking at what some of the incentives are that we can provide for people.

On agri-food and water, I think that is one of our biggest endowments, if I might say. If you actually look at agri-food and where it is being produced in the world, today, and you look at one of our biggest competitors, Australia—and I am not a deep expert in this, but what I understand is that the way that Australia gets its water is quite different than the way we get it. Their way of getting water is not going to last for very long. It is a bit like California. The countries that have a natural endowment in water—the four biggest are Canada, Brazil, Kazakhstan and Ethiopia. In my view, if you look at the global champions in food, you see a lot of Brazilian companies, Brazil Foods being an example. What they are basically doing is exporting their water via chickens. They convert water into chicken, and then they export it to the Middle East and other places like that. That is a big advantage, but when you actually look at how we use water, we are one of the biggest wasters of water in the world, probably because of the abundance of it. I think it is a huge, a very big opportunity for us.

On the third question there, as you said with procurement, what we are trying to do is ask if it can be a race for the top. We recognize we cannot tell the provinces because it is almost like if we did, they would do the opposite or something like that, so what we are trying to do is ask if it can be kind of a race for the top. Can the federal government even provide an incentive for those provinces that do the following thing?

We will encourage them in some way. What we found through this process is that the regional set of ideas that are coming through are really exciting—in British Columbia and Atlantic Canada, on the Prairies. We have not found people in the provinces that are saying, “This is crazy. Why are you doing it?” I think you have to make sure you have got the local group of leaders that are there because, in Atlantic Canada, it is quite different, obviously, than what they are dealing with in Saskatchewan. There is this sense of maybe we do need to be more supportive of people.

I think let us start. Hopefully, the federal government can get going on this and start doing and that becomes a role model. There has been a sense here that that is almost illegal. It is strange. Even in terms of our trade negotiations, will that affect us? The U.S. has been doing this for decades. The UK has been doing this for a long time. We just have to get modern, I think.

Q: There has been a lot of discussion about our seeming inability to grow and sustain global champions. How much do you think we should pay attention to that versus other broader growth initiatives?

DB: I do not think it should be the single focus at all, but I do think it is a component because you do have large companies that help a lot of small companies in a supply chain. There is one example when I was living in China. I was always amazed at how when the German companies would come over, you would have the Chancellor who would come, and then there would be ten big German companies, the ones you would expect, but they had to bring their supply chain with them. They were bringing with them a small set of companies as well because those companies could not afford, if you will, to go and get introduced to the Chinese market. I think, if you think about where a lot of R&D is done, there is a lot in startups, which we need to do. We have to have the breadth of it, but large companies do a lot on that side, too.

Actually, being part of global supply chains is critical in where things are. I do not think it should be the sole focus at all, but it has got to be a component. I think it is an indicator. For me, personally, when I look at it, I see these six or eight sectors where we have a natural advantage. I think we have gone from having 23 global champions to five over the last 20 years. It is unnecessary. Again, it is not to try and say we need a government policy to do it. That would be the last thing I would say. It is just more about the ambition around it. As we said, on the innovation, we want to get a lot better at commercializing our good ideas—again, with the business growth fund with venture capital and angel investors. We want to kind of get that flywheel working. That will also allow us to be able to create more of those companies.

And I also think the trade element will. It is going tobe hard to be a global champion if you are not linked to Asia. I just do not know how. It does not mean you have to move there, but you better have a set of relationships with that part of the world, or you are going to be irrelevant, I think, is what we think.

Ilse, I do not know if you want to correct anything that I have said. Thank you.

Note of Appreciation, by Chris Halyk, Chief Executive Officer, Janssen

Thanks, Barbara. Good afternoon. I am Chris Halyk. I am from Janssen Canada. Janssen Canada is the pharmaceutical company of Johnson & Johnson. I just have a couple of remarks to make. As a new year approaches, it is important for us to take some time and actually take a look and understand what kind of lies ahead of us. I think today was very timely with regard to the Empire Club and Dominic being here, today, to talk to us about what Canada needs as we end up moving forward.

Dominic, on behalf of everybody here, I do want to thank you for sharing your knowledge and your advice. I think your international experience and your role as advisor for many of the global business and political leaders really does give you some great insight into the challenges.

I was struck by a number of the comments that you made. I really appreciated your four forces transforming the global landscape and the opportunities that were around those.

I also thought about your recommendations, and the eight of them were great, but, particularly, as they related to foreign investment and the opportunity that is there and innovation as it ends up moving forward. I also agree with the recommendation to unleash the sector growth because, like you, I do think that healthcare is a huge opportunity as we end up moving forward.

As the world’s largest healthcare company, J&J looks for opportunities and conditions that will actually spur that growth as we move forward. For life sciences, Canada, I think, has a wonderful opportunity. Janssen Canada and J&J have committed more than $1 billion in initiatives over the last little while, which I think is great. Most of those have happened right here in Ontario. I think a real shining example of that is JLABS @ Toronto. For those of you who do not know, this was opened up in Ilse’s building back in 2016. It is really an incubator to help life sciences organizations to come up with new ideas to grow their business to move things ahead.

Currently, JLBAS @ Toronto has some 48 startup companies. Forty-three of those are here from Canada, and five are from the U.S. Really, it is an opportunity for those companies to be able to pursue opportunities in life sciences as opposed to ending up south of the border. Those companies really benefit from what is happening now in our economy, today. We have one company that is here with us, today. We have Naheed Kurji, President of Cyclica, here.

He is working in the biophysics area and artificial intelligence to help pharmaceutical companies be able to navigate drug discovery pipelines as it moves forward. He is just one of the 48 other companies that are actually out there. I think JLABS is a great example of the success that can actually take place with regard to the partnerships that have to happen out there, particularly, in relation to government, to research, to industry, to academia, as well.

You referred previously in your discussion about what is actually getting in our way as we move forward. I think one of the most important things is to ensure that that partnership takes place right across the spectrum, so between governments, between the industry, between research and all the opportunities. I think those are some of the things that we are going to have to remove.

We also have to make sure that governments are not getting in their own way, whether they happen to be regional or whether they just happen between ministries themselves in terms of what they are actually impacting. I think it is important that government and industry continue to get this right as we move forward. I think life sciences is a great example of that as we end up moving on. Economic growth is certainly an opportunity in this particular area. I think that you highlighted it extremely well.

In closing, I would just like to thank the Empire Club, once again, for hosting today’s event, and a very special thank you to Dominic, for McKinsey, for his excellent insights in terms of how Canada can grow. Thank you.

Concluding Remarks, by Barbara Jesson

Thank you, Chris. A sincere thank you to our generous sponsors, CIBC, Janssen, Bombardier and the Canadian Beverage Association for making this event possible. Without sponsors like these great organizations, the Empire Club lunches would not be possible. Thank you, once again, for your very generous support.

We would like to thank mediaevents.ca, Canada’s online event space, for webcasting today’s event for thousands of viewers around the world. Although our club has been around since 1903, we have moved into the 21st century and are active on social media. You can find us on Twitter @Empire_Club and visit us online at www.empireclub.org. You can also follow us on Facebook, LinkedIn and Instagram.

Finally, please, join us again soon at our next event. On November 20th, Rachel Notley, the Premier of Alberta, will be here with us at the Royal York Hotel. Thank you for your attendance.

This meeting is now adjourned.