45. In contrast, the American economy advances faster than the Canadian one *everywhere else*, more or less.
This holds up even in industries where you'd think that Canada would have a natural advantage, like logistics.
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Remember what I said about how urbanized the Canadian population is? The sound you heard in the background was the entire logistics industry salivating.
Plonk down a warehouse or two in each major metro and you're almost done!
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6. As of the 2016 census, Canada's population was ~35 million. More than half of them (~13 million) live in the five largest metro areas (Toronto, Montreal, Vancouver, and Calgary).
For Americans: that is like having ~165 million people across NYC, LA, Houston, and Chicago.
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Yet... as far as I can tell, the Canadian logistics industry offers a lower level of service at higher prices than the American one.
I haven't lived in Canada for a while, but here's a recent story:
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Last December I went home to visit family, and completed my mandatory 2 week quarantine in an AirBnB near the border. I realized that I forgot some toiletries and figured I'd buy them on Amazon.
... which could only deliver them within *10 days*. 😱
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In the US I can order ~anything from Amazon's catalog and have it delivered within 3 days, and all the basics (and more) are generally delivered next-day.
I genuinely have no idea what's going on here. What's up with Canadian logistics? If you have any ideas, please let me know!
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(Whoops, meant to call the logistics one opinion/observation number 47.)
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48. I don't know of any good statistics on this, but my impression is that Canadians are less likely to move for work than Americans.
A good chunk of people I know in the US "moved around a lot for [parents'] work", whereas basically everyone I know in Canada stuck to one metro.
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49. Relatedly, a significant majority of e.g., my high school classmates moved back to the Toronto area after graduating from university. My American college friends are pretty well distributed across the wealthy coastal parts of the US.
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I used to think that this was another consequence of how concentrated the Canadian population is, but now I'm less sure. I don't know that many Canadians who grew up between even two metro areas.
This might just be my filter bubble, so I'd be curious to see hard statistics.
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50. In honour of being half-way done, here's my single biggest puzzle about the Canadian economy:
Why are high-tech industries (Silicon Valley-type "tech", biotech, pharma, etc.) so underdeveloped in Canada, compared to the US?
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51. Let's look at the information tech/"Silicon Valley" tech industry first, since I've though the most about it.
On the surface, Canada feels like it should be a *better* place than the United States for the tech industry to flourish.
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52. The tech industry is largely built through startups displacing big companies, and Canada has a lot going for it when it comes to starting a startup. Single payer healthcare, a more robust social safety net (especially for the young), and lower wages all seem useful.
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53. The tech industry requires a ton of highly skilled immigrant labour, and Canada's immigration system is much friendlier to skilled immigrants than the American one.
If you're highly skilled and thinking about moving to Canada, check out Express Entry: canada.ca/en/immigration
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54. Even apart from immigration, Canada has tons of tech talent. Silicon Valley is filled with Canadian-educated engineers: if you look closely you can spot many of them by their Iron Rings: en.wikipedia.org/wiki/Iron_Ring.
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Something like 40% of the graduating CS class at the University of Waterloo ends up working in the United States. I'm told that a super high status thing for Waterloo CS students is getting a co-op/internship at every one of the FAANGs.
Canada has loads of technical talent!
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54. Canada is a smaller market, but it's probably the single best foreign country from which to launch in the American market.
We share a language, time zones, and culture. Canadians don't struggle to do business in the US.
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55. Nonetheless, the Canadian tech industry feels really undeveloped compared to the American one.
At any point in the past ten years, Canada has had at most one large, globally large tech company. Today, that's Shopify. When I was growing up, it was RIM/Blackberry.
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Back during the dot-com boom, Nortel was literally 1/3 of the total value of the Toronto Stock Exchange, until it spectacularly imploded. If I remember correctly it limped along on government subsidies for a few years before declaring bankruptcy.
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56. Canada has a lot of the ingredients of a dynamic tech industry, but not a lot to show. Why?
Tobi Lütke cites Canadian modesty: tobi.lutke.com/blogs/news/the
blames risk-averse angels: alexdanco.com/2021/01/11/why
People on HN think they know: news.ycombinator.com/item?id=6077025
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I certainly feel like there are some compelling points, but nothing that feels complete to me.
If you have ideas, I'm eager to hear them!
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57. This isn't just a tech industry phenomenon, either. We see the same pattern in biotech, summarized in The Globe and Mail (~the Canadian NY Times):
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This isn't to say that there aren't shining stars. Notably, Vancouver-based Acuitas developed the lipids used to encapsulate the Pfizer/BioNTech COVID vaccine!
And yet... the entire Canadian biotech sector is worth something like $30 billion. What's going on?
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58. One interesting story that might shed some light on differences between Canadian and American tech sectors is the cancellation of the Avro Arrow.
Here's a BBC piece, but I'll summarize the highlights:
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The Arrow gets covered ad nauseam in Canadian history, so, for the Americans: the Avro Arrow was a Canadian designed and built interceptor jet developed in the late 1950s. It was arguably the most advanced jet in the world at the time, and was supposed to be sold to NATO allies.
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The project was cancelled for not-entirely-clear reasons in 1959, devastating the Canadian aerospace industry.
The story still has remarkable resonance today. When someone found some plans that had been squirreled away, it was national news:
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59. I think this actually points to a natural weakness of the Canadian aerospace industry: aerospace is so nationalized and intertwined with defense that small countries struggle to compete in global markets. Canada will never be able to keep up with the US in defense spending.
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Young Canadian engineers warn each other not to study aerospace engineering, because most of the jobs are in the US and require security clearance that Canadians struggle to get.
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60. Another lesson to draw from the Arrow is: be way concentrating power over important industries in the hands of a small country's government.
Unfortunately this goes against most Canadians' instinct. We natural ask "how can the government help?".
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Replying to @cperciva
Unfortunately Canadian governments think that the best way to help startups is by setting up "innovation centers" and handing out subsidies.
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In the case of developing a tech sector, I suspect that the answer is probably "set up the right conditions and then stay out of the way." That's a tough pill for many Canadians to swallow, though.
At least some entrepreneurs in Canada agree:
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Replying to @cperciva
I don't want subsidies. I'm too busy building a business to apply for them. I want the government to stop giving my competitors subsidies.
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62. To summarize this chain of thought with statistics, Canada has considerably lower labour productivity than the US (2015 numbers: $49/hour worked in Canada vs. $63/hour worked in the US). A lot of this comes down to the lack of high-tech sectors.
Cite: conferenceboard.ca/hcp/provincial
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[That took a lot longer to put together than I thought, especially with all the graphs and stats. Gonna tweet some quick, breezy stuff about how all of this affects life in Canada and then pick this up again tomorrow! Happy !]
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61. So, what do these cultural/economic differences actually mean about life in Canada?
In broad strokes, Canadians are mostly poorer than Americans of similar socioeconomic status, except in areas where Americans deprive themselves of wealth in service of political signaling.
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62. In terms of material wealth, Canadians have (on average) lower incomes and lower purchasing power parity (something like 80 cents on the dollar, in exchange rate neutral terms).
Canadians can't afford to buy as much stuff because everything is just much more expensive.
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63. An example that Canadians will recognize is books. Most paperbacks with prices printed on the back list much higher Canadian prices, even adjusting for the CAD/USD exchange rate.
Last I checked, there wasn't a satisfying answer about why this even is:
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64. Canadians are mostly in denial about the degree to which they are poorer, in material terms, than Americans.
There's honestly a lot of cope about this and not a lot of serious analysis. No one wants to admit there's a problem!
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65. If you talk to people or look at discussions online, you'll see Canadians who are really eager to justify the higher prices north of the border.
It's the exchange rate!
It's our small population!
It's because we're a frozen tundra wasteland!
All transparently false.
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66. A common retreat tactic is to cite a "lower cost of living". This is fundamentally confused, since PPPP already adjusts for that.
I think a lot of Canadians don't grok how cheap most goods and services are in the US. There's a lot of this going on:
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When someone points this out, people will then fall back on "quality of life" but, when pressed, they'll usually cite things that are actually better in the U.S., indicating that they not only have no idea what U.S. tech is like, they simply have no idea what the U.S. is like.
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67. Another factor here is that upper-middle class people usually pay considerably more in taxes in Canada than in the US.
This is hard to see by looking at tax brackets: the top marginal tax rate in the US (37%) is actually higher than the top marginal tax rate in Canada! (33%)
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68. There are some differences in how the brackets are constructed, but the primary difference is that the US had a broad range of tax deductions laser-targeted at people making, say, more than $200k but less than $1 million/year.
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The US has deductions like SALT (a current political football as a de facto subsidy to high tax blue states), the mortgage interest deduction (recently reduced to cover "only" the first $750k in mortgage debt), etc. etc.
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Canadian tax deductions are much less generous, and are also usually calculated as "non-refundable tax credits", unlike American deductions.
In the US, deductions are worth *more* if you make more. In Canada, they are always calculated against a fixed tax bracket, and so aren't.
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