Transcriber: Maryam Joulaie Reviewer: Emma Gon
During my first year of college,
two of my best friends and myself felt changing there.
The year was 93 and I was living in Israel.
Everybody started talking about software programming.
We had no clue what innovation is,
but we were enticed by the idea of doing something new.
We opened a software company with a $2,000 of debt, a loaned computer
and my mother’s home address.
Everybody wanted to talk with us.
We were a novelty, but almost no one actually agreed to work with us.
Everybody felt that there was a change, but nobody knew what it was.
Seven years later, as a doctoral student, I came back to Israel.
The transformation was shocking.
Thousands of startups, loads of venture capital,
multitudes of companies going public on the stock exchange.
Welcome to the miracle of innovation based growth.
Yet, that’s not only a happy picture.
That rapid economic growth helped only
a very small part of the population, the geek elite.
Israel had become a truly unequal country.
Today as the Munk Chair of Innovation in the University of Toronto,
a co-director and fellow of the Canadian Institute for Advanced Research,
and in my shame and pains,
the Clifford Clarke economist for our Federal Department of Finance.
I’m leading forays into new thinking and new ideas
as we struggle to restructure our economy after COVID.
I’m especially interested in figuring out ways in which innovation can help
to have economic growth for the whole community, not just a small part of it.
It is exactly in those critical times that we need to understand
what innovation is, what it isn’t, and why should we even care?
Innovation is the only way to ensure
long term economic and human welfare growth.
However, innovation is not just invention.
Invention is the act of coming with new ideas.
Innovation is the act of taking ideas and making them
into a new or improved product and services all across the production stages.
Making things better, more reliable.
Cheap enough that every human having access to them.
Today, we actually have more opportunities
for innovation based growth than ever before.
Globalization means that we have deconstructed
the way we produce both stuff and services into four distinct stages.
Each one of them happens in a different place in the world.
The first stage is novelty.
Think Silicon Valley, where new ideas are being transformed
into new products and services.
The second focus on innovation
and the capacity to design prototype development and production.
Italy's luxury shoe manufacturing is a very good example.
The third stage a focus on innovation
that makes things better and more reliable.
And the fourth stage is innovation
in the production of goods and services themselves.
Think Shenzhen,
where from constantly changing tens of thousands of components and materials.
All of your latest electronics actually get made.
Tonight, I want to focus on the third stage,
decried by some as incremental innovation.
But in reality, the true hero of economic growth.
So what is the third stage of innovation?
Bicycles offer a compelling example.
Have you noticed how almost everyone in Toronto now uses bikes,
and at least as importantly,
how light and strong and faster those bikes are?
When I was a student, schlepping my bikes up and down the stairs was a real workout.
Now they weigh less than my backpack.
So let’s examine how we got from those old, heavy, bulky bikes
to the one we see zipping through Toronto today.
Chances are that your bike frame is made by a giant manufacturing company,
a Taiwanese company located in Taichung, Taiwan.
Over 50 years, Giant had innovated
its way to a position of global dominance
in the bicycle industry by becoming a third stage innovator.
Giant had its first breakthrough
when Schwinn, back then the leading U.S. bicycle manufacturer
in the seventies, chose it as a supplier.
In the eighties, when Schwinn ditched Giant
and move production to China,
Giant embarked on a series of joint projects
with Taiwan’s premier public research organization
becoming a leader in the new technology - carbon fiber.
Giant uses carbon fiber in a new way,
creating bikes that are both lighter and stronger.
Today, in Taichung, there is a whole bicycle production cluster
anchoreed around Giant and the business model
allow for the employment of thousands of people with different skill levels,
which means with people on the shop floor
have real career paths, not just the engineers.
So why not more places try to imitate Taichung?
The reason is the myth that with just the right effort,
our cities can become Silicon Valley.
Let’s be very clear about it. It is almost an impossible task.
And worse, you might curse the day you succeeded.
Remember Israel.
Israel evolved from, in the sixties,
having less than 900 R&D workers in its whole industrial sectors,
so basically less than a few rooms of this size.
Through a horrific economic and financial crisis
in the seventies and eighties
to the creation of a state led creation of a new high tech sector
and rapid economic growth since.
Yet, in all those years of rapid economic growth,
the rest of our economy enjoyed no positive spillovers.
Productivity and wages remained stagnant in all other sectors.
The focus on intense novel product R&D meant
that no good jobs were created for the non engineers.
The result in terms of inequality are striking.
If in the sixties, Israel was the second ugliest terrain in Western society,
today it is one of the most unequal.
One of every five families in Israel
does not have enough money to buy food at the end of the month.
Israel might have created Silicon Valley,
but it definitely did not create inclusive local prosperity.
That is why it is critical that we remember
that globalization means that there are now more models
for inclusive innovation based growth than ever before.
What will happen if instead of constantly trying
to become the United States, Canada tried to be like Taiwan?
The same public private research and development partnership
that allowed Giant to succeed had become the backbone
of an innovation system that allowed multiple Taiwanese industries to excel.
Currently, Taiwan is the only place in the world
that knows how to innovate
in the creation of the latest semiconductors silicon chips.
It is no longer Silicon Valley.
Today, as we just heard,
Canada faces two major transitions
on which we base or bet our future,
the green economy and new biopharma technologies.
My research suggests that if your aim is local prosperity
than instead of constantly trying to create Canadian Modernas
or Pavitts, Teslas to open a battery factory.
We should focus on creating
Canadian Giants just like Taiwan did.
Remember, innovation is not invention.
Challenge yourself to rethink what innovation is
and how innovation can lead to both economic growth and prosperity.
Looking at my own children, thinking about their future,
I wonder if we should not start, better start
looking east or west instead of south,
when we envision a model for our future innovation.
Thank you so much. (Applause)