Switzerland or Hong Kong. Neither location has much in the way of natural resources, yet both are international arbitrageurs par excellence, parlaying financial and managerial expertise into global might.
“The Swiss are smarter then we are. They manage to use our resources to make money for themselves,” says Fung. “Fortunately or unfortunately, we are spoiled by our own wealth. The hope is, more people will realize we don’t need to hack trees down to make a living. We can use our brain power.”
According to Amos Michelson, we already do. Former CEO of the Vancouver-based digital printing company Creo, Michelson argues that Canadians have superb technical skills and are relatively more productive than their American counterparts. He notes that while Canadians work 75 per cent of the hours of someone in, say, Silicon Valley, they are paid half as much. The upshot is a “cost performance that is much better in Canada than in North America overall,” he says. “And you get great people.”
The country’s real weakness, he says, lies elsewhere. Unfortunately it is the key to unravelling our own Gordian knot. Michelson, who navigated Creo’s ballsy breakout from $20 million in sales in 1995 to becoming an $800 million challenger to global leaders like Agfa and Fuji before being bought out by Kodak in 2005, doesn’t believe Canada has the raw material necessary to produce high-tech successes like, for example, his native Israel does.
The war-torn, desert-parched spit of land of 6.3 million people is a hotbed of technological innovation, with more high-tech listings on New York’s NASDAQ exchange than any other country except the United States. While Canada is flush with all kinds of advantages that other countries might only dream about, it lacks the one thing Israel has in abundance: drive. “Israelis are enormously aggressive in their desire to achieve something. The U.S. is somewhere in the middle, and Canadians are at the other end of the spectrum,” says Michelson. “We’re nice. But business and nice don’t work. Some people do whatever it takes to win, and other people just stop. That’s why there are not a lot of important companies in Canada— people are not willing to walk the distance because it’s not important to win.”
THE ROAD LESS TR AVELLED
Newton, Ontario, is just two hours northwest of Toronto, but it might as well be five centuries away. Horse-drawn buggies kick up dust on the shoulder of quiet country roads while boys in overalls and girls in floppy bonnets and flower-print dresses wait patiently for the school bus to pass. If Hamilton seems a Dickensian relic of the Industrial Revolution, then this small Mennonite community is a portal to a time before the steam engine or the spinning jenny were invented.
Yet the town, which has largely eschewed the trappings of industrial modernity, is a testament to the newest global revolution. Just past the smattering of buildings that line the main street sits the nondescript, aluminum-sided headquarters of Mitchell Mill Systems. A shiny new silver Cadillac is parked outside, a sure sign that company owner Paul Mitchell is in town from Beijing for one of his shotgun visits home.
An affable fifty-six-year-old with greying hair and ruddy cheeks, Mitchell got his first taste of China in 1989. His company, which manufacturers and installs grain and animal feed–handling equipment, was asked to participate in a project in northern China. Mitchell was immediately struck by the inferior quality of Chinese equipment and thought he could scoop up a share of the market with his superior product while helping to improve China’s grain-handling system at the same time.
It was the beginning of a fifteen-year odyssey that Mitchell admits would test his belief in himself and come at great personal cost. He moved to China in 1994 but, unable to afford the astronomical rent that most foreign companies paid to keep their employees in comfort, moved into a rundown flat with bad heating that cost just one hundred dollars a month. “I lived pretty rough for a long, long time,” says Mitchell, who also taught himself Mandarin. “I wouldn’t do it again if I knew how tough it was. But I was pretty stubborn — I wasn’t going to give up now.”
But, he acknowledges, he almost did. Not long after he first ventured into China, he sat on his bed in a hotel room, his bags packed, resolved never to return. He had “hit the wall,” his nascent joint venture with a Chinese partner had dissolved in acrimony, and he was exhausted by the relentless price gouging and unenforceable contracts. That night, three employees came to visit him and begged him to stay, offering to pick up their families and follow him wherever he went.
Mitchell took them up on their offer and built his own factory outside Beijing. In the end, despite all the hardship, it has paid off. Mitchell estimates that manufacturing component parts in China has made the company 30 per cent more competitive while its presence there has opened up vast new business opportunities. Multinational giants are now knocking on his door to build dozens of feed mills in China, while in Canada, says Mitchell, you are lucky if one mill gets built.
“We never would have gotten these connections just being in Canada,” he says. “Being in China has been so beneficial to the company. So many people have contacted us because we are there. We’re recognized more as an international company.”
The company, in turn, has grown by leaps and bounds, with more business than Mitchell knows what to do with. In the past decade, the workforce has expanded from thirty to eighty people and sales have increased tenfold. And like a stream that flows downhill, it all trickles back to Canada. “All the profit comes right back here,” he says. “The business is growing, so I hire more people, I buy more equipment from here [for the Chinese operations] and I can hire more salespeople here. Everybody is benefiting from us being in China.”
Yet despite finally reaping the rewards after years of struggle, Mitchell sold the Chinese subsidiary in 2006. His two sons, who both work at the Newton factory, live on sprawling acreages outside of town. They saw what expanding into China cost their father, and they are not willing to make the same sacrifices. Nor do they have to. Mitchell, a farmer’s son, immigrated to Canada at the age of nine from England. His family lived hand-to-mouth, eating a lot of vegetable soup and crackers and maybe, if they were lucky, meat on Sundays. He remembers, at fourteen, vowing he would never be poor.
That conviction, and “a pioneering spirit,” is what he believes compelled him twice in his life to take the road less travelled. The first time was when, at the age of just sixteen, he signed up for the navy. The second was when he was twenty-nine, with three kids and two mortgages, and he decided to forfeit a steady paycheque and strike out on his own.
In both cases he started out with a Canadian-born companion, and both times he was abandoned at the last minute, left to make the risky journey alone. Just as he was about to board the train for Halifax, the high school friend who had enlisted in the navy with him backed out. When it came time to start his own business, his would-be partner changed his mind, opting to keep his job at their old place of work. Mitchell eventually went on to hire his former co-worker. “He used to tell me,” says Mitchell with a smile, “that it was the biggest mistake he ever made.”
* In 2006, Huawei landed a five-year, twenty-one-country contract to supply Vodafone, the world’s largest wireless operator, with handsets based on third-generation technology.
* Australia has three banks in the world’s top fifty, according to the Fortune 500 list of the world’s biggest companies (2006), compared with one Canadian bank.
† Carrefour rings in at number twenty-one on the Fortune 500 list, with an annual revenue of us$90.4 billion, compared with George Weston’s us$23 billion.
* American-born Robert Milton was chief executive of Air Canada before taking the helm of its parent company, ace Aviation, and British-born Clive Beddoe heads up WestJet; now, both of Canada’s major airlines are run by foreign imports.
† The Saskatchewan Wheat Pool was originally founded as an anti-corporatist co-operative by prairie farmers.
‡ Canadian Business magazine named Canadian Tire’s Virginia-born Wayne Sales as Canada’s top CEO in 2005. Sales stepped down in 2006.
* Cott’s American CEO , John Sheppard, stepped down in May 2006 to be replaced by another American, Brent Willis.
†