Why are Canadians (in tech) so risk averse?

Odd that in a country that has so many safety nets we are generally risk averse as a society.

By VICTOR ANJOS

It comes off as a bit odd actually, we live in a country that is huge and has a ton of opportunities to branch out and do something amazing, yet we’re an often (self-proclaimed) risk averse culture. This doesn’t simply just hold true across the board nor does it sound like sensationalism to anyone other than those that are not, but we as Canadians like to stay in our lanes, ask for a lot of forgiveness and are often overly polite – often to our own detriment.

In tech, specifically in Silicon Valley, LA, Seattle and New York, founders are not afraid to fail even though most do. When they fail, it’s a celebration; they wear it like a badge of honour. Then they fail again and again after that, each time learning from their mistakes. Some folks assume those places, especially the Valley, has a magical formula they employ to generate a higher success rate for startups than anywhere else. Their formula is simply to try more things more often and more quickly than anywhere else.

"In tech, specifically in Silicon Valley, LA, Seattle and New York, founders are not afraid to fail even though most do. When they fail, it’s a celebration; they wear it like a badge of honour."

Is risk inherently a bad thing?

Not always and definitely not in all sectors.  Calculated risk is what you really want to make sure to keep your eye on – risk for the sake of risk doesn’t work out so well. A little bit of risk aversion in the right places (such as shady trading practices) is what made our banking sector the envy of the world during the financial meltdown of 2008, but in the #startup game, it’s a hindrance.

"Many Canadians are so hesitant to avoid risk, but the irony is that there is often just as much danger in staying put……Not taking a risk is a risk……Taking risks is what propels you forward."

If a risk results in failure, rest assured that failure is not the end of something, it is just a step along the road.

If a risk results in failure, rest assured that failure is not the end of something, it is just a step along the road.

Are Canadians oblivious to the risk-reward cycle?

In order for us to cultivate new ideas we need to not only cultivate but to actively encourage risk. Funny that we as a nation agree that risk-taking is good and that we should celebrate failure. But we stop short of actually executing on that ideology.

Prof. Peridis of York University’s Schulich School of Business contends that while Americans “celebrate winners,” Canadians tend to be more muted. “We are a little more shy, timid. We don’t do that in our culture. We’re not boasting,” he says.

A large majority of Canadians believe that business leaders should be open to taking more intelligent risks in order to foster #innovation. According to a recent Microsoft study 84% of Canadians believed leaders in business need to take more calculated risks for the sake of innovation, yet only 53% felt the company they worked for was doing so.

An overwhelming 97% of Canadians felt that companies must embrace new technologies to remain competitive, while 96% say that #technology is shaping the future of how they conduct their work.

What we need to do is overcome the misconception that risk automatically equates to danger. We need to transform the idea of risk into a true opportunity. Business leaders need to empower their teams and drive forward innovation.

Why the risk aversion Canada?

 
Canada’s complacent culture can only be overcome by developing a national strategy that remains unimpeded by provincial or territorial variances and Canadian businesses can no longer continue to be insulated from foreign competition through protectionist measures.
 
While it’s understandable there are political realities and you can’t remove all protections overnight; where we do provide protection is actually not helpful for us because we don’t get competitive intensity and we end up being comfortable instead of competitive.
 
One of Canada’s saving graces may be its imminent influx of immigrants, many of which come from more risk-tolerant cultures. Yet, what remains to be seen is whether or not those immigrants influence Canada’s overwhelmingly risk-averse culture to be more risk tolerant, or if they will simply assimilate to Canadian complacency.
 
Many newcomers to Canada will find their way into country’s burgeoning Information and Communications Technology (ICT) industry. While most tech startups excuse the lack of ICT success (relative to the U.S.) as a condition of Canada’s desolate venture capital landscape, it’s important to note that venture capitalists remain elusive precisely because they lost so much money during the bursting of the dot-com bubble that they are now far too risk averse to take a chance on Canadian ICT enterprises – most of which are forced to go to the U.S. for funding.
 

Immigration Policies and Risk Profiles

 
Seeing as Canada is still largely dominated (in its urban centres, the ones where the vast majority of startups occur) by the influx of people from abroad, it is natural to examine the effect that this has on us.

From personal experience, having moved to Canada when I was a child, I know that my parents have always touted a secure, well paying, corporate job as the pinnacle of my career existence.  Luckily (I think) I did not really listen to them and instead educated myself as much as possible on all sides of this “risk” coin, making my own decisions.  I am certain I have passed up some lucrative opportunities to instead stay in #Toronto and build up my chosen community (as well as the startup community), however it’s meant a lot of fun, exciting, anxious and trying days.

When we moved to Canada in the mid 80s my parents were able to get in as highly skilled tradespeople.  I have seen and heard of many skilled business people (in other people’s families) that were not able to get into our Visa system. The Visa systems in the North America rewards workers (and well off students) but keeps a very high barrier for entrepreneurs (#Entrepreneur visas are very rare and require a high level of #investment). I have met many families where there are many entrepreneurs who run successful businesses in Europe and Aisa but none of them will be (easily) eligible for our work visas. This leads to a lot of lawyers, engineers and scientists moving to Canada, while the best of the businessmen stay put at home. 

War and Peace

 

In most of the rest of the world, war, corruption and instability have been the norm and as such, unlike us, have been used to economic crisis and bad economies for generations. Many of them have a natural first instinct to try to stabilize their families and consolidate their financial positions.
 
This makes for a societal norm where most err on the side of saving their money (a lot) and thus take less risk. This is part of the reason that many of the newly landed families are not hit by mass credit crises and are often insulated from recessions (their savings are, not their livelihoods). The second and third generations of immigrants will be less risk averse and this can be seen by many of the acclimatized families that have been here since the 50s, 60s or 70s.
 

Your Net Worth is your Network

 

Entrepreneurship requires a very large lot of local networks.  This often takes time to find and become a part of, and for the second, third (and beyond) generations there are plenty of networking opportunities (school, neighbourhood, sporting teams, relatives, college, grad school, etc…). For many immigrants, those networks are not fully built in the US when they come there. It takes a lot of years to build them.

Family Matters

 

Most families that move to North America tend to come, earn a pay cheque and send back quite a bit of help to their mother country.  #Family really matters to them – in a way that, we in North America often pay lip service to, but they take it seriously. Most Caribbean, Asians and Africans tend to have much broader family responsibilities and family ties are a central part of their cultures.  Not only is a penny saved a penny earned, they also believe in the betterment of their entire bloodline.
 

Final Thoughts

 

Whatever the reason for Canadian business’ aversion to risky R&D, it is important to note that funding riskier projects does not automatically lead to R&D success. Although Canada does not have a large global competitor pursuing R&D such as Google or Facebook, there may be good reason for Canadian business’ and funding agencies’ safer approach to R&D.

Canada’s innovation has been affected in the past by the failings of Blackberry and Nortel. These experiences may have had an adverse effect on the enthusiasm at which riskier R&D projects in Canada are initiated and funded. However, diversifying the projects by funding some high risk (but not so much that the risk of failure would be monumental to business and the government) and other, lower risk projects may provide the boost that Canadian innovation needs and may appease critics of Canada’s R&D funding programs.

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