Kevin Ebert MBA(FS) Class of 2014 sent in a question to Dr. Rick Nason:
“Major FI’s around the world currently see Canadian consumers being massively over-levered and the Toronto/Vancouver housing markets as ‘bubble-concerns’. Viewed another way: Consumer spending, via low interest rate credit, has been the ‘fuel’ for Canada’s economic performance and GDP growth. What advice would you give MBAs currently leading Canadian-domiciled companies, looking to maximize growth & opportunity, while minimizing risk/exposure to these issues?” Kevin Ebert MBA(FS)
In the fifth installment of striving for success in 2019, Dr. Rick Nason discusses consumer spending, economic performance and GDP growth.
Dr. Rick Nason:
Consumer spending is the only engine behind GDP. If consumers do not buy anything, then businesses don’t make things, which in turn means that businesses don’t buy anything, and so on into the box top of the classic box of Moirs chocolates. So, we cannot put the blame on consumers.
Having said that, Canadian consumers are arguably over-leveraged. However, we have also been, in my humble opinion, coasting on a variety of made-in-Canada factors for a very long period of time. I won’t go into the specific factors that I believe we have been coasting under for fear of this being labeled a political blog. I am sure that the reader can make their own list.
As Canadians we are incredibly lucky. We have a relatively stable and responsible government (my comment in the previous paragraph notwithstanding), we have an embarrassment of natural resources, and we have, for the most part, a suitable climate. What this has produced is a corporate culture that has become fat and lazy; despite our daily machinations about working such long and hard hours. Of course, some of us (ahem ahem) have literally got fat and lazy, but we will leave my personal state of affairs out of this blog.
I believe that there are two short and simple responses to your question. The first is to stop thinking that you are a Canadian company. Yes, take the advantages that being Canadian provides you, but take those advantages and learn to play on the world stage. Yes, that means that you need to leave behind some of the Canadian advantages, such as protectionism, behind. But wake up, we are a big country with not many people. As the rest of the world develops, it is learning to do more with less, and on a much larger scale of people, and yes, that includes a much larger base of consumer spending. That means that the rest of the world is developing experience at scale. We do not have the scale, and to get it you must go out and think and behave globally.
Leaving your familiar backyard is scary. I remember leaving my neighbourhood when I was approximately 10 years old with a group of my friends to play a street hockey game against a neighbourhood on the other side of the town that none of us had ever been to. It felt as if we were taking a trip to the moon. It sounds silly, but I think that is what many Canadian companies still feel. Admittedly, as Canadians we have one heck of a nice neighbourhood, but how are you to develop your street hockey skills unless you get out there and test your skills, and learn new skills from other neighbourhoods? (Hope you appreciate my Canadian spelling of “neighbourhood” in this paragraph and the home-grown theme of street-hockey.)
The second, and related solution is to compete! compete! compete! Except for hockey, and perhaps only women’s hockey at that, we have forgotten about how to compete. (Okay – time to break the no politics rule.) Take for instance interprovincial trade. We don’t even want to compete interprovincially! Historically, there were arguably some valid reasons to prevent too much competition. Unfortunately, that is now being laughed at by the rest of the world (although one prominent figure with arguably worse hair than mine – although I have undisputedly the more natural complexion – is making a mockery of international trade and competition for the moment.)
Since you brought it up, Canadian financial institutions, in particular, have forgotten how to compete for the simple reason that they never needed to. Retail Canadians, and corporate Canada for that matter, are notoriously sticky consumers of financial institutions. We pick our financial institutions based on proximity, and the only time we change is when we change our neighbourhood – and even then, we keep our old accounts going. Canadian financial institutions constitute a classic oligopoly.
I love Canada. If you slit my wrists, instead of red and white blood cells you get Maple leaves, hockey pucks, and whatever crap the pulp mill in my neighbourhood was spitting out the day that I was born. However, I got most of my post-secondary education south of the border, and spent most of my non-academic career south of the border. The difference in the willingness to compete, in both academia, and in business continues to astonish and annoy me. We are a wonderful and blessed country, but if you want GDP growth (we can argue whether that is a worthy goal or not), we gotta step outside the neighbourhood and compete.
 For those of a too tender age who did not get the reference, do an internet search for vintage Moirs Pot of Gold Chocolate box