Speaker 1 [00:00:01] Hi, it’s John here. Today, we’re taking on a slightly different topic for us here on disruptors. We’re talking dirt, but let’s be respectful and call it soil. We have a lot of soil here in Canada. In fact, our farmers have the 12th largest agricultural landholding on the planet. It’s a huge opportunity, both when it comes to growing food for an increasingly hungry world and also fighting against climate change because soil has an incredible ability to store carbon and it’s going to take technology and investment from a whole range of people to help generate what we’re calling the next green revolution. It starts with soil. And to help break it down for us, I’m joined by a special guest, my colleague, Mohamad Yaghi. Mohamad, welcome to Disruptors. Thanks, John. It’s great to be here with you. It’s great to have you on the team as our agriculture and climate policy lead here at RBC. I should point out, you’re also a farmer on the side, so you know a thing or two about soil. And I’m hoping you can walk us through some of the basic elements of soil and what’s called carbon sequestration in soil. When you’re looking at soil, the four most fundamental properties that you have to observe are MP K’s plus organic seed. What does that mean? And stands for nitrogen. And that’s largely responsible for the growth of the leaves on plants. Phosphorous, which is largely responsible for root growth. Potassium which is a nutrient that helps the overall functions of a plant. But then lastly, you have our organic carbon, which is fundamental to the overall growth of a plant. And you can find this organic seed everywhere around the world. One of the great opportunities in all of this for Canada is that big land mass so we can capture more greenhouse gases with the soil right across the country. If we reward farmers, particularly for protecting that land and preserving it while they also produce from it. What sort of things can farmers do to enhance the ability of their soil to capture greenhouse gases? Farmers have a wide variety of functions on what they can do on their farm to increase carbon sequestration their soil, and this carbon ultimately helps plant development. Certain practices like notes help, for instance, cover crops. The application of bio char all contributes to the increase in carbon sequestration. And this carbon sequestration not only helps to grow, but also keeps our planet cool. So all of this revolves around nature, and listeners may be wondering, what are you doing talking about nature on a technology podcast? So help connect those for us, technology and nature which do come together in this field. Absolutely. So I’m really excited about this because technology has a huge promise in helping us better understand not only our world but the dirt in it. In the past, we used to try to measure carbon in soil. Let’s say I take my farm, for instance. I would go to eight different places across the farm, collect six inches of soil, go to a laboratory, put all that soil on a tray, mix it together, and then put it in the oven to measure carbon. But what we can do today is so much more that we can start using satellite imaging data to use different light spectrums to measure carpet in soil today. So the farm of the past, they use a sensor to the lab doesn’t necessarily need to do so anymore with the promise of technologies such as satellite imaging. So on farm sensors, they can measure carbon in real time. Well, sequestering carbon in soil is a huge opportunity, both economically and environmentally. But much like farming itself, you just can’t plant the seed. The idea needs to be nurtured if it’s really going to blossom and make Canada an example that the rest of the world can look up to. This is Disruptors, an RBC podcast. I’m John Stackhouse. As I mentioned earlier, Canadian farmers manage the 12th largest agricultural land holding on the planet. It’s more than 150 million acres, and that land has the potential to sequester almost 40 metric tons of carbon every year. It’s a huge opportunity, but taking advantage will require a combination of incentives, education and technology. So to help us think through that challenge, I’m excited to speak today with two experts on the topic. In the second half, we’ll meet a Regina based carbon credit company that’s helping farmers keep their soil healthy and their farms profitable. But first, I’d like to introduce one of Canada’s leading thinkers on soil science. Dr. Angela Bedard-Haughn is a professor and dean of the College of Agriculture and Bio Resources at the University of Saskatchewan. Angela, welcome to Disruptors. Speaker 2 [00:05:06] Hi, John. Thanks for having me here today. Speaker 1 [00:05:08] Oh, it’s great to be chatting with you again. I want to start with a bit of your own background because I’ve heard you refer to yourself as a soil nerd. How did you first get interested in soil? Speaker 2 [00:05:19] Well, I grew up on a farm here in Saskatchewan, about an hour and a half northeast of Saskatoon, and it was central to our livelihood, obviously. But I must confess, I didn’t give it a whole lot of thought until I was well into my university career. Took my first soil science class. And I just I was completely smitten with the whole concept because it allowed me to bring together my scientific training in terms of geomorphology and understanding how landscapes had developed and formed and the agricultural landscapes of my youth. And so from there, full steam ahead, just really trying to understand the drivers of the variability of soils across the landscape and how they function. And that’s been the path I’ve been on for the last 25 years or so. Speaker 1 [00:06:00] A child of the soil, as they say, I don’t want to date you, but when you think back to your studies, was carbon sequestration a big part of the soil conversation? Speaker 2 [00:06:12] It wasn’t a big part of the soil conversation, certainly not the way it is now. I think, you know, there was certainly an awareness of the importance of soil organic matter. Conservation tillage was already something that was pretty widely adopted here in the prairies, and so we understood some of those benefits. But in terms of all of the additional potential as a major offset for greenhouse gas emissions, those conversations, I think, were happening, but they were much more fringe. Speaker 1 [00:06:39] Well, you mentioned conservation tillage. Some people like to refer to zero tillage, and it’s been widely heralded for many years as a victory in soil management. I’m curious how you’ve seen the evolution of attitudes towards conservation tillage or zero tillage from the seventies to where we are today. Speaker 2 [00:06:57] I think some of the big pieces with that, I mean, first of all, it came about as more of a risk management tool, right? So when we think about the timelines for adoption, it was coming out of some of the really rough years in the eighties and looking at ways to allow farmers to mitigate their risk for erosion. For example, there are photos from the eighties that you would swear were taken in the thirties in terms of the clouds of dust blowing across the prairies. And so conservation tillage was one mechanism whereby by reducing that physical disturbance of the soil, we were able to allow the soil to essentially hold together better to aggregate, better to form these more stable chunks of soil in the field. And that, combined with the residues left on the field, made it much more resistant to both wind and water erosion. But as an added bonus, it also allowed the soils to basically accumulate more organic matter, which allowed them to retain more water and retain more nutrients. And so the more we understood what those additional benefits were and farmers started to see that value proposition, it really started to pay for itself in terms of a beneficial management practice here in the more semi-arid to subhuman parts of the prairies for sure. Speaker 1 [00:08:07] One of the risks we think about a lot is the question of false precision in climate science, particularly on the mitigation and abatement side. We have a tremendous understanding of how certain technologies and processes work in terms of how they reduce emissions and capture emissions, but sometimes not as precise as all of us might like to believe. I wonder if you can give us a bit of a high level sense as a soil scientist of what we know and what we don’t know in terms of the power of soil to capture and sequester carbon. Speaker 2 [00:08:42] Well, I know we don’t have a whole day, so I’ll just try and give you those really high level points. So when we think about how soils are storing carbon, I want to just step right back and think about it. First of all, in the context of this is a fundamental part of life on earth, right? So plants are undergoing photosynthesis. They’re capturing that carbon dioxide from the atmosphere, and it’s through the return of those plant residues to the soil, the decomposition of that material that we end up with carbon in our soil. And. A form of soil organic matter. So when you think about all of the variables that would be associated with plant growth across a field, and you add to that the variables that are driving soil development and formation across a field, you very quickly start to appreciate why we have these questions about precision. So if we think about spatial variability first, so when we look at soils just taking a few steps across the field, there can be a really high degree of variability depending on whether you’re on a slightly higher or slightly lower position in the landscape, depending what the management practices. All of these things are influences in terms of the spatial variability of carbon. And then we add to that the temporal variability, because carbon is not just a one and done thing, it’s part of the global carbon cycle. What we’re seeing in the soil is a picture in time. So every time we’re measuring soil carbon, some of it is stored longer term, but a lot of that is cycling annually. So to borrow from the banking analogy, at any given point in time, what we’re seeing is the net balance. We’re not seeing the gross amount of carbon that’s gone into and out of the soil. And so if we have a number of really wet years where productivity is really high, you’re going to tend to see more carbon going into the soil. We have dry years, you might have crop failure or less vegetation growth and that in turn is going to mean there’s less gross inputs in that particular year. Speaker 1 [00:11:04] Well, I want to ask you about how we can organize ourselves better for this. But first, let me ask you about the challenge here for farmers. Are they going to have to go around their farms and Saskatchewan? Some of them run into tens of thousands of hectares, so they are massive farms scooping soil samples from each different type of field, Or are there other technologies available to make this more efficient? Speaker 2 [00:11:26] There are a lot of technologies in development right now, and so we’ll get more into that when we talk about that organized piece. But as an example, there are proximal sensors that allow us to essentially, you know, stick a probe into the soil and not have to collect quite so many samples to have an indication of how much carbon is in in a particular location at a given point in time. Speaker 1 [00:12:13] It sounds like the climate smart farmer is going to need to be as much technologist and data scientist as agronomist and farmer. Is that what you’re teaching in the school? Speaker 2 [00:12:23] We are really getting to that point now where we have to be thinking about all of those pieces. And I think we’ve gotten to the stage where, you know, not everybody can know everything, but we’re trying to build more and more of that team mentality where at least we have enough common vocabulary. So our new precision ag cert is really aimed at trying to bring together engineers and computer scientists and agronomists and soil scientists to say, okay, you know, what’s the common language that we need? And then we’ll all go and work on our components of this particular problem. But no matter what, we’ll all be able to sit down together in a room and brainstorm on collective solutions. Speaker 1 [00:12:57] Let’s turn to this question of organizing. All this sounds incredibly interesting and important at the farm level, but someone’s going to have to pull all this together in a broader market, but also ecosystem for farmers, the entire food supply chain. What do we need to better organize all the different people involved in this? Speaker 2 [00:13:18] Couple of pieces, I think that are going to be really important. One is getting a better sense of who’s collecting what information, right? So understanding what data is being stored, where is there somebody who is collecting widespread data that can be used as a broader net to bring disparate datasets together to link those pieces? I think at the core, we’re going to need somebody taking that responsibility and saying, okay, this is important. We need to find a way to synthesize these data and we need that collective social buy in where people are saying, Yeah, will, I’m willing to share my data because I understand that this is part of that enhanced precision that’s greater benefit in terms of being able to quantify what’s happening out here. Speaker 1 [00:14:36] Well, that’s one of the reasons we’ve been advocating this idea of a national soil strategy. In the research we’ve done in our Next Screen Revolution project, that collaboration with BCG and the Arrell Food Institute at the University of Guelph. We tried to explore the climate transition in agriculture and how the economy can support farmers and reward them for preserving soil, not just for what they produce. I wonder in your mind, Angela, whether it’s called a national soil strategy or something else? What it would need to include or address? Speaker 2 [00:15:07] I think the key things that it would need to include or address really is getting that that solid baseline data in place. So understanding that there’s not going to be a perfect solution. I would worry that if we said, Oh, we got to wait until we’re in just the absolute perfect space to or start from scratch with a complete new national soil sampling strategy that we might lose out on an opportunity to build that momentum. So right now there is a lot of interest. There’s an understanding of the importance of soil. It’s central city to some of the major challenges that we’re facing climate, water, food security. All of those pieces are linked so intimately with the soil. And so that national soil strategy is, I think, one of the key things is timeliness. Right. Let’s not wait. Let’s get started on it. I think that’s the key thing. Speaker 1 [00:16:01] Well, that’s a great note to wrap up this segment. Thanks so much, Andrew Luck, for being on disruptors. Speaker 2 [00:16:05] Great. Thanks a lot. Speaker 1 [00:16:07] Angela Bedard-Haughn is a dean and professor at the University of Saskatchewan. Please stay with us. We’ll be right back with the CEO of a company that’s been helping Canadian farmers manage carbon for more than 15 years. Speaker 1 [00:17:02] Welcome back. Today we’re talking about soil and how we need to dramatically change the way we manage, view and value it. Our next guest is Marty Seymour. He’s the CEO of Carbon Rocks, which is based in Regina and specializes in the origination, digitization and streaming of carbon credits. Marty, welcome to Disruptors. Yeah, it’s great to be here, John. It’s great to have you on the podcast. Thanks for being part of it. I’d love to begin by hearing about your company’s background. What’s the CarbonRX origin story? We have an interesting one in the carbon spaces. My founders were part of the first generation of carbon credits back in all five or six, and they were operating under a trade name called C Green at the time. And why I love the story is they were, I would say, the pioneers in carbon when you think of Western Canadian farmers engaging in the system. And they ran that program until the financial crisis of 2008, and all of a sudden carbon fell out of favor. And so it made founder and chairman of my board often jokes. He says, I think I was 15 years ahead of my time. And so we brought carbon our ax to life a year ago in April to really take advantage of the tailwinds around the carbon conversation that was happening. And every event I go to, every conference I go to and to the point of your podcast, it’s a conversation that everyone wants to participate in. At the same time, I find wealth farmers tend to be skeptical about pretty much everything, but they are skeptical. Whenever I raise the idea of carbon offsets and the trading market. When you think back to 2006 and the beginnings of carbon regs, how do you think farmers attitudes towards soil management and sequestration and then more broadly, carbon credits have changed? Well, I can actually speak to it firsthand because as we brought carbon credits back in 2022, I started to meet those original first generation farmers and I keep expecting to get blasted from these guys like, Oh, carbon was a rip off, didn’t work for me. I think the first users of carbon offsets and protocols at the farming level were innovators. They knew they were ahead of their time. The other I would say that the next part of the bell curve coming in to participate in carbon is what I call carbon. Curious is they actually don’t know. I’m finding as we engage in carbon credit trading is we’re building the industry in the language at the same time that we’re trying to build our companies. But most of the expertise in the space are three years old, two or three years old. You know, the epicenter of carbon was Alberta because of the oil and gas industry. But outside of that, carbon is pretty new in every remote corner of this country. There are many different kinds of credits as well and different kinds of carbon capture systems. You play in both the industrial and nature based systems. Give our listeners a sense of the difference. Yeah, I actually hold an office up the hallway from a group of engineers. They work for a company called Delta Clean Tech, and they’ve been at carbon capture for 17 years and I’ve learned a lot from them. In hydrocarbons, you can measure how much CO2 is in oil and gas before it goes through a process of refining. And you can measure how much is emitted into the atmosphere thereafter. And so that team puts meters on things to actually measure stuff. So I think the hydrocarbon industry is very sophisticated in knowing what they have at the beginning, in what they have at the end. I’m actually jealous because I spend a lot more of my time on what’s called nature based carbon, which is what our farmers do, what our force trees do. It’s nature’s way of harvesting carbon under the atmosphere. It’s a biological system, it’s highly variable, it’s highly dependent on a lot of different things. So it becomes a complicated measure, unlike my friends in oil and gas that I wouldn’t say it’s easy. It just feels easier. After you’ve been trying to chase plants around the field, trying to figure out how much carbon they’re capturing. You’re touching Marty, on one of the great challenges and opportunities in the space, which is known as MRV, the measurement, reporting and verification of what the soil is doing to capture carbon and other greenhouse gases. It’s still pretty nascent and there’s a lot of variability in measurement systems. How do you help people through that uncertainty or ambiguity, especially in markets where people like certainty? Yeah, I would say that’s the tension that exists in the carbon credit ecosystem right now is the difference between what a grower’s capable of measuring and managing to what a buyer’s expectation is. We need to move to a system where we’re using a lot more remote sensing and data as historically we drove around in trucks testing soil to measure carbon, and it was the most sophisticated, probably still defined as the most accurate. But it strikes me as ironic that we’re using carbon to drive around and measure carbon, let alone the cost implications and the lack of efficiency. And so we’re at, I’d say, ground zero on the application of remote sensing in agriculture, which I think allows us to scale. So this next generation of technology will drive the economics. And so there’s money left for the landowner, which will drive behavior changes, which will attract more money and drive more behavior changes. And like a flywheel on a car, it will gain momentum. And that’s the opportunity inside of carbon as it matures at the farm level. Walk us through, Marty, how you think this is. Going to work. When I try to simplify this in my mind, I can imagine the day where if I want to invest in a carbon credit, I go to someone like you, give you $100 and say, Marty, give me a certificate for this, and you’re going to go give that hundred dollars to a farmer, let’s say, to protect his or her land and demonstrate that they’re capturing Ph.Ds. Is it going to work that simply. No, it’s not going to work that simple, because if it would, we’d already have that in play. It’s why people are still carbon curious. There’s a whole bunch of complexities that I’m learning as I grow in this business too. But you take forestry, carbon and avoided deforestation. So not cutting down trees, there’s a value of that carbon to the buyers. Some people love that. There’s others that only want to buy carbon that comes from planting trees. In agriculture’s version, there’s zero tail farming practices, which Western Canada would be a pioneer in that. And you get into the cover crops conversation in southern Ontario and what you end up with is varying attributes of the carbon credits based on the system they come from. And there’s open carbon trading platforms because price discovery is a problem. Is a credit worth $5 or $10 each Carbon credit, based on where it comes from, has a story attached to it. My advice to growers is make sure your story is attached to your credit because it’s the best way for you to find a premium in your pricing. Tell us a bit more about what you mean by story. Is it simply the type of crop or the farming techniques that are farmers using? I think technique for me, John, allows more for a story. So regenerative agriculture is a term that that’s used widely if a practice is for generating soil carbon. That is a practice that a buyer sees value in more than reduction. Reduction is what the oil industry is doing is reducing the intensity, the carbon emissions. Farmers need to do that too, and how they operate. Removal is the Holy Grail. And so if you could actually say I’m taking CO2 out of the air and parking it in the soil for 100 years, those credits should be and will be worth more over time, because that’s what we’re really trying to do here as a carbon economy is true removal. So reduction is necessary. That’s companies reducing their footprint. But removal puts all the power in the landholder because there’s only a few places we can park carbon. The number one is in the land, in the soil. That’s where it came from. That’s where it’s going back to. I’m intrigued that you use the word story because that sort of connects with marketing and some of those is indeed about marketing. We’re all familiar with the hamburger ads that show cattle roaming open pastures, and that’s a farming technique and cattle farmers are rewarded for that. And the hamburger chain gets to maybe charge a bit more or at least market it differently, a sustainable beef. So there’s the value of storytelling through through a supply chain that’s a little different from what I might describe as an asset model where what the farmers doing becomes more of a financial asset through the soil, or they can convert the soil into a financial asset that they can then sell to anyone. How far off is it from the marketing version, supply chain version of this model to something more open ended? That would be soil as an asset. Well, in agriculture, we’re headed down that path where farmers can and should be rewarded for the good practices they do. They’re accumulating wealth in their soil as carbon. At the same time, being recognized for those contributions to the betterment of society in some sort of lending product or lending term. I think we’re in the earlier days where we’re really still marketing carbon on its attributes. So where did it come from? How much effort was put into capturing that carbon? And then and that alone appeals to buyers because it’s important differentiation that the voluntary carbon market is different than the compliance carbon market, voluntary market. Yeah, I really enjoy it because it’s really capitalism at its finest often described voluntary carbon as the kijiji of carbon. The buyer and the seller agree on the terms, and so as a result, it allows the buyer to create a story that allows the seller to create an expectation of how much rigor went into the credit. Was it derived from no till? Was it derived from the reduced emissions and build that compliment out. Over time we will get to where we start to see carbon as an asset in terms of the soil value, You know, I still self celebrate as a farm kid, John, and at its core the farmers I talk to aren’t necessarily interested in carbon as an asset. The revenue stream is really a byproduct of what they really want to do, which is improve soil health. Simply speak to a grower. When you talk carbon, they kind of glaze over because it’s new. They know they need to do something. But if you reframe it to say, do things that improve your soil health, farmers are up for that already. This is an exciting tech race and we always need to remind ourselves that it’s a global race and there’s lots of incredible things going on and high tech all over the world as we move towards close. Marty, I wonder if you can give us a sense of where Canada is positioned in the great high tech race and specifically in the technologies that are required to create these sorts of markets? Yeah, I have many thoughts on this one, John. In my past life, I used to help market beef internationally in other countries, and I learned quickly that the Canadian brand stood for something. It’s why we market our country as clean water, lots of trees, mountains and a very environmentally friendly place to live relative to others. So there’s a pent up demand to buy a Canadian based carbon credit simply because the Canadian brand stands for something. Overlay that to your question about technology and where it is Canada set. I actually think because we have such big broad acre farms in Canada, we’re the most likely place to pioneer remote sensing, our most likely place to pioneer robots where we’re trying to scale big acres, big volume, using technology to try to address labor time and certainly drive efficiency into the system. I’m in central Canada in Regina, and we’ve got a hub of ag tech going on right here where companies are innovating all the time, and it’s because they moved to Regina to scale these businesses, because our farms are 5000, 10,000, 20,000 acres big, and you can test your stuff on more acres. So can you be a front runner in this? Probably more of us is always next, bigger than us. But if you look at application of carbon technology, I’m feeling more lift in Canada. They in any other place I go Europeans they’re heavy on the regulatory the measuring side is through the validation really good at that. I think Canada is winning the race on tech. If there’s one thing we could do better to secure that race, what would it be? Well, I think we have to be prepared to experiment a little bit. John and I, I actually look to Canadian companies in this space. So the compliance market, the government, one that’s managed, is trading. It’s all based on emissions reduction and measured and supported by government. The voluntary market requires leaders is kind of a contrary opinion, John, as we often think at the grower level and getting them to use these things. I actually think big blue chip companies in Canada set the weather so companies that need to buy offsets need to look to Canadian sources first. And so to me, what Canada could do better is start by buying local because it’ll set the weather on how important carbon is and carbon management is. And more importantly, the two clients have a set of trust that allows them to build a story around the quality of credits so the both parties can feel good about the trade. Those are great messages to wrap up with Marty. Let’s set the weather and let’s experiment. Farmers experiment every season no matter what the weather is, and that’s not a bad model for all businesses across the country to think about as we get deeper into the carbon economy. Marty, thanks for being on disrupters. Thanks, John. It was my pleasure. That was Marty Seymour, the CEO and CEO of Carbon Racks. My thanks also to Mohamed Yagi from RBC and Dr. Angela Bedard Hohn from the University of Saskatchewan, who joined us earlier in the episode. It’s inspiring to hear people speak so passionately about something most of us probably take for granted. The ground under our feet. But it’s clear from these conversations today that Canada has a remarkable opportunity to lead the world in harnessing the carbon storing capabilities of soil. I was really struck by Angela’s comments about perfection being the enemy of progress. Every farmer knows this. None waits for the perfect weather or perfect precipitation to make the perfect tomato. They deal with the imperfections every day and every season. And as we develop these new models, not just of farming, but of preservation and conservation, we’ll need to be more comfortable with embracing a little bit of imperfection. And if we get the right mix of investment and technology and, yes, mindset, we’ll get to a place where every farmer can be a carbon farmer. They’ll need the right support from government, from private companies and investors to make it happen. But the opportunity is before them. And yes, underneath the fertile ground indeed. I’m John Stackhouse and this is Disruptors, an RBC podcast. Talk to you soon. Speaker 3 [00:31:21] Disruptors, an RBC podcast is created by the RBC Thought Leadership Group and does not constitute a recommendation for any organization, product or service. It’s produced and recorded by our audio for more disruptors content like or subscribe wherever you get your podcasts and visit our BBC.com disruptors.

John Stackhouse [00:00:01] Hi. Its John here. It’s only March and 2023 has been an incredible year for cyber attacks. In fact, the worst year on record. There are high profile security breaches that have caused serious damage to some of Canada’s largest companies, including Empire Foods, Indigo and Maple Leaf Foods, with costly impacts that are running into the millions of dollars. Cybersecurity has become an increasingly national security issue, too. And hackers are getting more and more sophisticated. We’re going to talk to some incredible leaders in the space. But before we get going, I wanted to turn to someone who knows more about cyber than almost anyone else I know. Adam Evans is RBC Senior Vice President and Chief Information Security Officer. Adam, welcome to the podcast. Thanks very much for having me, John. Adam As I noted in the intro, it’s been a year and we’re only in March. Give us a sense of the scale of what’s going on out there today. What I’ve certainly seen in the last few years, John, is what I would call the democratization or the commoditization of crime. What I mean by that is you’ve got threat actors that are operating in criminal undergrounds and they are commodities in criminal services. They’re offering up ransomware as a service breach, as a service malware, as a service, and they’re franchising out those services to other cybercriminals. So the sophistication required to execute an attack against an organization or an individual is obviously coming down. The barriers of entry into cybercrime are coming down. And at the same time, organizations like RBC or other businesses are digitizing and the bad guys are also digitizing. They’re leveraging things like machine learning and artificial intelligence and automation so they can attack organizations or individuals at scale. And to me, the last piece I should mention is that we as a society are putting more information than we ever have before online. So we’re creating this target rich environment. These guys can collect all this information at scale. They can tailor it as they set up their attacks against individuals or organizations, and that increases their success rates of successfully compromising an institution, a business, small, medium or large or an individual. So it’s sort of a perfect storm is brewing for certainly the cyber and in the underground marketplaces that they operate in. And yet, in spite of all those incredible threats, many firms are seeing security now as an asset. It’s a strength for organizations. Give us a bit of more sense of what’s going on there amongst those who are turning more to the offense, if I can put it that way. Yeah. So I think as we become more connected or interconnected and we’re doing more and more things online, we as individuals are taking an active role in our own security. How do we protect ourselves and our families? More online and organizations are going through the same thing. They’re becoming far more educated about how these threats unfold, the types of things that they are going to be managing as they operate their their businesses in this digital threat landscape. So as companies go through their digitization and we as individuals are becoming more interconnected, we need to make sure that we take an active role in how we protect ourselves. And obviously, the more knowledge we have about the cybersecurity landscape, the better off we are and the more secure we are. And that trust is now become an intrinsic part of the customer relationship with a business. Any business that you do transactions with and a bank is no different. So we are investing in educating not just our employees, but our clients and making sure that when they’re interacting with us as a bank, they’re doing it in the safest way possible. But hopefully they take those skills and that knowledge into their daily life and they’re able to protect themselves and their loved ones more effectively. I’ve heard you say, Adam, that were attacked every day, all day, which is daunting. Most organizations are going to have the resources to deal with that. What’s the future for them? So you’re starting to see more and more services that are available to businesses through, you know, the likes of the Microsofts of the world. So you can simplify some of your technology by allowing a company like the Microsoft with their cloud services to potentially give you some of that security inherently in the services that they provide to you. But I think it all comes down to risk. You have to understand the risk that you as a business own and operate. So you look at where your riskiest services or information assets are. You divert your resources to make sure that you’re protecting those resources from compromise, from inadvertent leakage. As you hire people into your organization and you educate them, they become the first line of defense. And it’s a very human centric security approach. What can we all be doing differently and doing better? Staying educated, I think is. The biggest thing is preparing for the when of it, not if it’s going to happen, it is going to happen. That’s a great point to wrap up on. Adam, thanks for being on disrupters. Thanks very much for having me. That was Adam Evans. RBC Senior Vice President and chief Information Security Officer, talking about cybersecurity during fraud prevention months. As we just heard, cybersecurity is getting closer to one’s core business, but it’s also creating a new set of challenges. It’s a risky new landscape, but with that, a large opportunity. This is Disruptors. An RBC podcast. I’m John Stackhouse. Joining us now is Michelle Zeitlin, a Saskatchewan born entrepreneur who is the CEO, co-founder and president of Cloudflare, a San Francisco based Internet infrastructure and security company. Cloudflare, among other things, blocks an average of 126 billion cyber threats every single day. Michelle, welcome to Disruptors. Michelle Zatlyn [00:06:11] Hi, John. So great to be here. Thank you for having me. John Stackhouse [00:06:14] I want to start with that number, 126 billion cyber threats every day. Give us a sense of where that’s coming from. Michelle Zatlyn [00:06:22] It’s a big number. Sometimes it’s hard to process. I think maybe stepping back, the Internet is becoming more important to everyone’s life. And you just have to think about your own life to see how that is the case, where as individuals, we’re all spending way more time on our computers or in our mobile phones and then at work, we do so much more of our work in a digital environment. And so as all of us spend more time on the Internet, cybersecurity becomes so important because it’s all in this digital space. And what’s interesting is you see in this number 126 billion cyber attacks, that’s how many attacks we stopped on behalf of our customers yesterday. And so I think it’s a real testament to Internet traffic is up, which is great, and allows all of us to do a lot of different things and in a positive way. But at the same time, there’s a whole threat landscape that businesses and people have to think about as they spend more of their time online. John Stackhouse [00:07:14] You may not have pictured that perfectly as the future when you and one of your Harvard Business classmates founded Cloudflare back in 2009. But today, I believe it’s somewhere in the range of 20% of global Web traffic runs through your servers. You have some pretty unique insights. Given this reach, can you share some of those in terms of what the biggest changes are that you’re seeing out there, both in security and resilience? Michelle Zatlyn [00:07:40] For sure. For sure. Well, the first is that because Internet traffic is up, so are just general online risks. And so if you look over the last year, cyber attacks globally increased 40% year over year in 2022. One of the other interesting insights is 90% of those attacks start with a phishing attack, which basically means 90% start with a person, an individual. We’re seeing some of the biggest attacks we’ve seen. And then a bunch of these attacks start with the individual who often are employees at a company and saying, well, there what are the implications around that? John Stackhouse [00:08:19] Where is the increase in attacks coming from? Michelle Zatlyn [00:08:21] They’re really broken down into three main areas. The first is Adidas attack and Adidas attacks. It’s called a denial of service attack. Making it hard for a business was an online service. They kind of knock it offline. A good analogy is if you’re going to the bank to try and get money out of the ATM. And there were 100 people in front of you, but they’re actually not taking money out of the ATM. 100 people in front of you actually aren’t legitimate patrons and you’re stuck 101 in line, can’t get access to the ATM. So in the digital world, that’s called the dial service attack. And that is one source of these of these increased threats where we’re just seeing a lot more DDoS attacks against businesses. And the good news is if you have the right solution, it’s very easy to deal with it. But there’s just a bunch of businesses that haven’t gotten to putting in the right solutions yet. And so they’re very prone to it and so they’re very effective. The second rise comes back to people, and as we all work from everywhere and before, you know, a few years ago, you basically went into an office building and the office building was very secure. But now there’s a lot more of a hybrid work structure where we’re doing work from our homes, from our cars, from coffee shops, as well as an office buildings. And so some of the attackers are taking advantage of that. They’re seeing it as an opportunity where all of a sudden my hybrid work setup isn’t as good as where it was when I was going to this fortress office building every day. And so there’s a big increase in targeting individuals, and it’s been a pretty effective. The third one is around ransomware. And if you are a business who receives a ransomware note, I can promise you that is not a good day. It’s very violating. It’s very stressful for your team and often you have very little time to make a decision about what you’re going to do. And if you’re not well prepared, there could be a lot of consequences to those decisions that you make. John Stackhouse [00:10:08] I would not want to wish this on anyone, but if it does happen to someone, what should people think about and do in those early moments? Michelle Zatlyn [00:10:15] So step one is you something you write about in the news to ask yourself, How would we have fared? And you will learn a lot both. You either feel better being like we would have fared really well, or actually it exposed all these gaps. And now let’s go fix it. So get ahead of it If you don’t get ahead of it and these things happen, let me tell you, those ransomware attacks, those emergency situations, John, always happen on a Friday evening or a Saturday, always, because teams are less staffed up. You can’t get the right access to the right people internally. They’re not available. They’re out enjoying their Friday night or they’re sleeping or they. Went away for the weekend. But if you do find yourself in this unfortunate situation, don’t pay the ransom. It’s really hard. You kind of want to call some experts to get some help and do some smart things to get ahead of it. There’s lots of great vendors who are out there to help advise and say, here’s what you should do, and then share the information so it doesn’t happen to others. A lot of organizations don’t call anyone for help and they try and deal with it themselves cause they’re worried about the media headlines. And I think often they end up in a really tricky situation when they follow that playbook. John Stackhouse [00:11:19] This really is war. And I got to hear your co-founder, Matthew Prince, talk a bit about this at Davos a few months ago. And he explains Cloudflare is role in the Ukraine conflict, which is a pretty incredible story, both in terms of what you’ve done to help Ukrainians up their cyber defenses, but also help Russians who want to get around Putin’s firewalls. What does Cloudflare learn from the conflict that may be relevant to cyber conflicts everywhere? Michelle Zatlyn [00:11:49] You know, it’s interesting. It’s awful. At first when the conflict happened, there was a lot of speculation that there would be massive attacks against Western businesses. And I don’t think there have been massive attacks, mostly because everyone’s been really busy with the on the ground conflicts. But we do see an increase in probing. And what’s interesting when you look at the data, John, is you would say, okay, the attacks are coming from Russia towards these Western businesses or countries. It’s not like that. The source of the attack is from many Western countries around the world, and it’s not like Singapore is doing it, but they have some devices that have been compromised that are being controlled somewhere else. And so the source of the attack actually is coming from within Germany or within Singapore looking for these vulnerabilities, but being controlled elsewhere. And that’s why sometimes trying to understand who’s behind the attack is actually a very hard question, because often the resources being used to launch it are in a physical, different location, often a physically different country than where the person who is controlling it. That’s what we’re seeing, where they’re using compromised resources around the world to look for these vulnerabilities and probes. I guess what that means we can all do or a couple of things. If you run your software updates individually, super important, like run your updates, that’s a really good security practice. And if you’re a business, there’s some messaging around it shields up making sure that you’re learning from other companies and what’s happening and using this time to do your own review of saying, okay, if this happened, how well are we prepared, Where are we strong, where we weak? What are we doing to close the gap? You’ve got to be having those conversations internally, otherwise you will be compromised and it will be a Friday night and it will then be an emergency. John Stackhouse [00:13:35] We’ve heard in a few conversations now this idea of cyber culture, and you get to see a lot of organizations. What do the ones who have a strong cyber culture do? Right? Michelle Zatlyn [00:13:46] It’s really this idea of it’s everybody at the companies job, not just my team’s job. And so whether you’re in marketing or sales or even security team, of course, the security team keeps the company secure. But they talk about it internally. They do training internally. There’s a mechanism to say, hey, this looks strange, even if it ends up being not a real security vulnerability versus not. I think that internal training is really important. And then the second aspect is really cross team collaboration. It’s often security teams partnering with the IT organization, with the engineering organizations saying, Hey, I understand we have this vulnerability, okay, what are we going to do to close it? So this internal collaboration and then the third piece, John, is really learning from other people’s mistakes. Sometimes they’re very public and that can be hard to read about and say, okay, using that situation, say, would we have been better prepared? What are we going to do about it? And then in the in the security world, there’s a lot of private conversations that take place to and being part of those conversations, but really saying how do we rise all tides? This is an evolution. You’re never done. You’re never 100% secure. It’s a never ending conversation. But having a system saying, okay, how are we doing? How we tracking? And if you just have that iteration in evolution, all of a sudden you’re in the top quartile trending really, really well and defending not only your customers and your employees from attacks, but protecting the business. That’s a really good cyber culture. John Stackhouse [00:15:09] Michelle, you shared some great insights as well as advice. I wonder if we can wrap up with some thoughts on where you see things going from here. Cloudflare has a great purview of the entire world. Where do you see things going, not only through the rest of 2023, but in the years ahead. Michelle Zatlyn [00:15:28] So right now what I see is we are going to continue to hear about breaches and cyber attacks. They’re not going away anytime soon. And we as people and businesses have to take it seriously. Now, here’s the good news. I have two pieces of good news. The first is I do believe that the solutions today are much more effective and more. More economical than they were five years ago. There’s a lot of easy to use, very effective, well priced solutions that really make it easier for businesses and people to take these things more seriously. I am hopeful as more organizations and people, as all tides rise, we learn more. We realize this is something that we just as we spend more of our time digitally, this is just part of doing business digitally and that’s okay. And our norms get more baked in. And as more organizations have layered in the security that was to be completed at a later date, like they’ve put that into their into their organizations, that five, eight, ten years from now, the whole Internet has been fortified and we are in a much better place collectively. And then there’ll be some new trend to have to deal on. But that that is kind of my prediction for the future. But right now, you got to take it seriously. And if you’re not, it’s like your organization. If you’re on a team within an organization and then you individually, we all have a role to play. John Stackhouse [00:16:44] Everyone be on high alert, but there is hope on the horizon. Michelle, thanks for being on disruptors. Michelle Zatlyn [00:16:50] Thanks for having me. John Stackhouse [00:16:52] That was Michelle Zatlyn, COO, co-founder and president of Cloudflare. Canada is home to some great companies fighting the good fight, including Fredericton, based booster on security. Joining me now is David Shipley, both Orion’s founder and CEO. David, welcome to Disruptors. David Shipley [00:17:09] Thanks for having me. John Stackhouse [00:17:11] David, let’s start with the name Beauceron. There’s got to be a story behind that. David Shipley [00:17:14] There actually is a bowser on is a sheepdog from northern France, and we named our company after this great breed. In honor of something we called the Sheepdog Effect. How do we turn people from the passive victims of cybercrime into the active defenders, from the sheep to the sheep dogs? Now, we would have picked sheepdog security, but the name was already taken. So we were down to two dog breeds. And as the boss, Ron had the right breed characteristics and a little nod to new Brunswick’s bilingual nature. We thought a French sheepdog would be great. We never anticipated that it would be pronounced hilariously around the world, and nor do we anticipate that gentleman from the coast region of Quebec are also known as both sirens, which we are glad to to also acknowledge as well. John Stackhouse [00:17:56] Well, you had me a sheep dog. That’s a great introduction to the company. And I wonder if you can tell us a bit about yourself because you’ve been referred to as the accidental cyber CEO. How did you get into the sector? David Shipley [00:18:07] So I’ve been a Canadian Forces soldier. I was an armored driver and gunner. Then I became a newspaper reporter after I graduated from university covering business, crime and politics. I left that to become the Digital Marketer website lead for the University of New Brunswick. And on Mother’s Day 2012, we got hacked by a hacktivist group called Team Digital. And on that Sunday morning, I was out walking my Greyhound and I got the nasty note from the attacker saying, We’ve posted your stuff to pastebin your IT admin suck. So I called my friends in the IT department who I worked closely with and said How can I help? And I used the skills I had from the military and from communications to help do what we would now call incident response. And from that experience I learned that cyber is more about people, process and culture than it ever is about technology. And so that’s where we went down the journey of focusing on the human side of cyber. John Stackhouse [00:18:55] As a great point. And I’m sure we’ll get more into this, that cyber is much more about people than technology. One might say the same of real military conflict which you’ve been exposed to. What are some of the similarities and differences, David, between classic military combat that you trained for and the cyber world that many of us did not prepare for? David Shipley [00:19:16] Well, in a firefight, you see the bullets coming. You know where your enemy is In the heat of all that in cyber, you don’t see the shot coming until it’s too late. It’s a lot more subtle. And what we’ve learned from the conflict in Ukraine is that cyber conflict is best in the period between peace and war. That gray zone when hostilities are escalating. And you can see that in the in the experience of Ukraine from 2014 right up to the launch of the invasion in 2022, they used it for intimidation. They used it to cause economic harm. So cyber is highly useful as a political tool, as an espionage tool, as a public influence operational tool, but as a destructive tool. It has not fulfilled that, that clear, easy to use operational purpose. John Stackhouse [00:20:04] Why is that? David Shipley [00:20:05] Well, because if you’ve got a relatively good defense behind it, it can take a long time, months or years for a team to get lucky enough to break in. Because keep in mind, most times when you break into an organization, it’s through the use of social engineering. So phishing emails, text, phone calls, etc.. But 80% of the time you’re not finding some obscure bug in a firewall. You’re getting someone to click on something in an email. And depending on how good the organization is, you may get a one in five chance where someone falls victim and then you’ve got to get by all the security tools that might catch that on the way through. So it’s tough. John Stackhouse [00:20:43] This has been an extraordinary year. Every year seems like that in cybersecurity. But this. Truly has been. What are you seeing or realizing today that you might not have appreciated a year or so ago? David Shipley [00:20:56] I think, number one, the focus that Ukraine put on basic cyber hygiene, the core fundamentals of of patching systems, educating users and multi-factor authentication. I think the other thing is it really did crystallize how long it takes offensive cyber operations to actually succeed. They don’t work at the same pace or tempo as physical conflict. The other thing that I wonder about is how cyber will be used in different ways to help Russia’s economy during this period of prolonged sanctions. And for those who aren’t familiar. Russia has very interesting relationships with a number of the large ransomware gangs, and these gangs build the criminal infrastructure, the evil cloud, as it were, of tools that are then resold to people around the world to execute extortion crimes and more. And they’re being used more and more to bring in desperately needed cash to the country. North Korea is also doing the same play. Iran is starting to in the same work where they’re not hacking to necessarily kick off a fight with the Western world, but they are hacking to get the money they need to continue their other conflicts. John Stackhouse [00:22:04] All of this can and should be seen as extremely threatening to individuals or organizations. And we all probably need to be doing a lot more to protect ourselves and those we work with. There’s also a lot of organizations out there that see this as an opportunity as well. The cybersecurity can be an asset. That’s something to invest in for growth, not just for defense. When you work with organizations in a range of sectors, what kind of growth mindset are you seeing on the cyber front? David Shipley [00:22:35] So I have the privileged position of being the co-chair for the Kenyan Chamber of Commerce Cyber right now council. And this is a group made up of all kinds of cyber businesses of different sizes, everything from giants like Microsoft and Amazon to companies like Beauceron to Phenomenal Made in Canada Cybersecurity stories like BlackBerry, which a lot of people don’t realize is a huge player now in cybersecurity. And we look at this as a massive economic opportunity. Canada has a phenomenal, trusted brand in the world, and we build amazing products. You’ve got great companies like one password, which is, you know, what we would call a unicorn. You’ve got East and Tiger out of Waterloo, Field Effect out of Ottawa, you’ve got VeriFone, which came out of Atlantic Canada, which had a massive sale to Nasdaq, which helps with online fraud and other other types of crime. So we we punch way above our weight. We’re in the top five in the world when it comes to companies making cybersecurity solutions. What’s really interesting is in it world, Canada just did a good job highlighting this is we’re abysmal at buying our own stuff. Well, the world is actually doing a lot of buying Canadian, but back here at home, particularly the federal government, it’s it’s not even remotely a priority, which is just kind of interesting and and it kind of fits a narrative. We we very rarely see how clever we are as Canadians. We often look across the border, what are they doing in Silicon Valley, etc.. But the reality is we’ve got amazing talent here. John Stackhouse [00:24:02] Give us a better sense of why Canada has that capability. How did we get into the top five? David Shipley [00:24:07] Well, interesting that there’s a there’s a bit of a tie here back to New Brunswick. So one of the first major cybersecurity exits in Canadian history was to radar, where Q One Labs, which is bought for IBM for more than $600 million and was part of a pair of exits featuring multiple founders that amounted to almost $1,000,000,000 in exits from tiny New Brunswick. And that started back where I started at the University of New Brunswick, where they were trying to keep their network running because residents kids kept crashing it and they had to figure out what was going on. And we’ve done a really good job of being on the bleeding edge of using the Internet. And and I would say we, particularly in New Brunswick, we embraced the Internet like no one else. We had the first broadband to the home in this country in the nineties. We had fiber going here and that meant we were also on the leading edge of seeing all the bad things that come with the Internet. And I think Canada’s climate plays a role. We’re online quite a bit. Why? Because the weather’s terrible a large part of the year. So, you know, we’re digital citizens and I think we’ve learned a lot of lessons from that. John Stackhouse [00:25:10] Yeah, I would talk a couple of points up to immigration as well. And there are New Brunswick has been a leader, ironically, with a lot of Ukrainians coming to New Brunswick and the UNB in particular, that the cyber cluster around UNB that helped to accelerate some of that growth well before the war. And I imagine that will continue. So being a talent magnet is critical. What more do we need to do? You mentioned government procurement as a clear step. What else can Canada do to stay in the top five or even become a more dominant player in that in that elite? David Shipley [00:25:43] Well, I think I think for me, the most important thing that Canada needs to do is put. In place. The the regulatory guardrails are going to help us be successful economically, not just in cyber, but in every other sector. Right now, Canada is lagging behind the world, and whether it’s in online privacy protection, when you look at Europe and GDPR, which hilariously is based on a principle called Privacy by Design, which was Dr. Anne CAVOUKIAN in Ontario, the former private information commissioner. So we we invented the gold standard of privacy, and we still have not implemented it here in Canada. And we’re years away from doing that. And the problem with that is if companies aren’t sent the right signal about protecting data, then all the other pressures that a business will face will override that. Now, the other part is, is unleashing more cyber talent. There’s a three and a half to 4 million worker shortage in cyber, and we have amazing programs in Canada. The leader in this is Toronto Metropolitan University’s Rogers Cybersecurity Catalyst, and it has created the gold standard. I had the privilege of being in a meeting with some of those folks and some of the folks from the White House Office of the National Cyber Director, and they were learning from some of the great things that we are doing in Toronto. John Stackhouse [00:27:00] It’s interesting, David, how you frame the opportunity as well as the challenge around privacy. I’m intrigued when organizations and I think it’s pretty much all organizations now project themselves or present themselves as being a data organization or a data company. And with that comes the imperative, but also the opportunity to see privacy and cybersecurity more broadly as an asset, as a corporate strength. It’s not a cost of doing business, of course it is. But the more you invest, the greater that asset grows. As you work with companies in all sorts of sectors. What do you find most compelling to the operators in terms of re-imagining themselves as not only a data company but a cybersecurity, large privacy minded company? David Shipley [00:27:47] I think what gives me hope and inspiration for companies is that they’re realizing that being secure can be a competitive advantage and respecting people’s privacy can help build better relationships and longer term brand loyalty, which is awesome. But there is a bit of an interesting cognitive dissonance between that thinking and the siren song of Big Data. So what we’ve heard for a decade, you know, if you if you keep it, if you hoard it, if you’ve got it, sooner or later, some magical I might unlock some hidden insights into that data. Except that ignores that there’s a portion of data that has a declining value or it actually becomes a liability and not an asset. And we we jokingly call it zombie data because it writhes in the grave in a data breach and it bites you in the backside. It’s the data that actually did not have the value that you thought it had, that if you had tighter retention policies, if you really went to minimum viable data, that in the event of a breach because you didn’t retain it anymore, you couldn’t lose it. And so there’s going to be an interesting tension between the drive to find greater businesses, efficiencies, insights and whatnot with the reality of dealing with these kinds of issues. John Stackhouse [00:29:01] We started the conversation talking about both runs origins. Tell us as we wrap up about where you see the company going in the years ahead, where do you see the greatest opportunities? David Shipley [00:29:10] It’s interesting that the human side of cyber is responsible for over 80% of all security incidents, and yet less than 1% of cybersecurity spending are the 175 to $200 billion on cyber is spent on people. And what we’ve discovered within organizations is that when you help them know more and care more about security, not just take mandatory annual compliance training or do phishing exercises, when you go further and say this is how you be successful at your job here and teach people how to use these tools, and this is why security matters to our executives, you end up with a stronger business, and that’s the mission that we’re on. When we talk about the sheepdog effect, it’s not just about reacting to in bad Guys Attack. We’ve built resilient, great businesses that people can rely on. John Stackhouse [00:29:55] What a great message to wrap up with. David, thank you for being on Disruptors. David Shipley [00:29:59] Thank you so much for the opportunity. John Stackhouse [00:30:01] That was David Shipley, founder and CEO of Beauceron Security. I’d also like to thank Adam Evans and Michelle Zatlyn, who joined us earlier in the podcast. Cyber threats have been around for as long as the Internet, but things have really changed in the last few years, both with the pandemic and the conflict in Ukraine. The rush to work from anywhere, shop from anywhere, entertained from anywhere, created all sorts of opportunities, but also put organizations and all of our data at a new threat level that we’re just coming to grips with. The economic consequences have also grown as criminal gangs and even nation states have seen all sorts of new opportunities through ransomware and other cyber threats all the while. As we heard on this episode, dark forces in the world have gotten better and better, but so too have the capabilities of all sorts of organizations that are on the front lines protecting our data, protecting our devices pretty much all day, every day to battle that, as our guest said, may never end. But it’s also a battle that Canada can play a special role in. If we leverage our talent, our tech capabilities and knowledge to turn cybersecurity challenges into opportunities that will make the Internet safer for everyone. I’m John Stackhouse and this is Disruptors, an RBC podcast. Talk to you soon. Announcer [00:31:30] Disruptors, an RBC podcast is created by the RBC Thought Leadership Group and does not constitute a recommendation for any organization, product or service. It’s produced and recorded by Jar Audio. For more disruptors, content like or subscribe wherever you get your podcasts and visit rbc dot com slash disruptors.

Speaker 1 [00:00:01] Hi, it’s John here. 2023 is shaping up to be another tough year in tech. In the U.S. alone, more than 100,000 tech workers have already been laid off this year. Google, Microsoft, Amazon are just some of the giants that you’re seeing in the headlines shedding thousands of jobs in the last few months. As an onlooker, things appear to be pretty dreary. But how does it look from the inside? I’m in California at the C 100th annual summit asking just that. Canadians those are the C in the C 100 have gathered in Silicon Valley to talk about the tech climate. How bad is it? What do entrepreneurs have to be mindful of? And are the worst of the layoffs over? Maybe a self-correction was overdue. Maybe this is time for new companies to shine. Let’s remember that General Electric, just one example, was founded during the Long Depression. Hewlett Packard was founded during the Great Depression and Microsoft was founded during a recession in the 1970s. In Canada, Hootsuite and Shopify are among the many tech companies founded during recessions. So what better time than now to create and innovate? This is Disruptors, an RBC podcast. I’m John Stackhouse. Today, I’m reporting live on location from Silicon Valley to get a snapshot of the tech sector through the eyes of Canadians. In the thick of it, I’ll be speaking with founders and venture capitalists for their thoughts and insights. But first, let’s get a sense of the landscape from Andre Sharrock. He’s a managing partner at Maple VC, a venture capital firm with Canadian roots. Andre, welcome to Disruptors. Thank you for having me here. Andre It’s been a rough start for many in the tech sector to 2023. The recent lay off announcements all carry a sort of theme of Oops, we over hired during the pandemic and now we have to scale back. People like Mark Zuckerberg are admitting it. Microsoft, too, Is the worst over? No, that is a great observation. It feels like everyone made the same mistake in a way, and they’re correcting for it and they’re all saying, Oh, it was my fault, right? They over hired. ET cetera. It’s not over for tech in any shape where form tech really propels or excels in an environment that we are entering. Right. Like if you look back in all sorts of moments of downturns over time, the best technology companies are created in these times. Why is that? Well, one is capital efficiency, profitability, things that we are hearing now that matter more than ever before that are frankly fundamental and important for building business and profitable commerce. At the end of the day, and so for sustainable businesses to matter in this world, capital efficiency is important. The other that comes to mind is focus. When you have a ton of capital at zero cost, everyone and their mother has an innovation lab and oh, there’s this department. And I was speaking to a prospective LP, they were doing a tour of one of their portfolio companies and the CEO was doing this tour of the office and they skimmed by a room and they were like, Wow, there’s a lot of people over there like, What are they doing? And the CEO could not communicate or articulate what that team was doing. And that is like that. That is an example of the times we came out of capital wasn’t properly being allocated. Yeah, many people forgot that technology is a business, right? It’s not a charity. It’s not religion, it’s a business. Right. And so business discipline is back. Yes. You’ve been through cycles before. A lot of the entrepreneurs I’ve been talking to seem to have suffered, and they now recognize they suffered from two binges in 2020 and 2021. One was the hiring binge, one was the capital binge because money was free. So it was easy to raise. And because of the pandemic and so much changing all around us, everyone went crazy with hiring. In some ways, as painful as it is, you can adjust to the hiring binge more easily than you can to the capital binge. And that may be one of the challenges I’m hearing for the year ahead. People are going to be hearing a little more stern words from their investors, saying your runway is not infinite. What do good entrepreneurs and great founders need to consider as they kind of stare at that somewhat limited runway of on the capital side? So to set that up even further. Last year, no one really went to the markets as much, at least in the earlier stages, where I play because everyone had 24 months of runway or plus. So let’s not let’s not mess with this environment right now. We’ll wait till next year. But to your point, rightly so. Well, of course, next year you’re going to this year, i.e. you’re going to have 12 months of runway. So guess what? You’re going to have to go to the market. And that valuation you got with that runway that you touted last year, well, the economy changed. So your contracts that you thought you were going to close are not closing. Now, some can get very creative. I think the best founders will find ways to make money, maybe from customers they didn’t think would be customers or didn’t put an emphasis on or a priority on or whatnot. And so I think some of the best founders will find a way to make money a B, now that they’re running out of cash, it’s okay to do A down round. You know what no one talks about matters down round in 2009. We should talk about that. I don’t know all the details because it wasn’t talked about, but some of the best companies in the planet have down roots. It’s okay. And my message to the VC is, and speaking also to myself is don’t put a bunch of structure around that. I like If you are in the world of venture, the game is about upside potential, not protecting downside risk. At the end of the day, one or two or some small relative small percentage of your portfolio will outweigh all the losses. And so while you shouldn’t reward the founder with the same valuation and that’s completely fair, I think founders should be open to down rounds and VC should be open to clean terms on those down rounds. And then we will we will grow out of it. Can you explain, Andre, to our listeners what a downright. Is and why it matters to a to a startup. Sure. And so a valuation is ultimately implied at the earliest stages, less so on the fundamentals of the business, right? These businesses are either pre-revenue or very inconsequential revenue, so you can’t really give them a revenue multiple to imply a valuation. And so the valuation is really comprised of how much someone is willing to pay on the investor side and what the founder is willing to give up on the founder side. And that math take one and divide it by the other implies the valuation. And so while that is effectively a vanity metric, founders ultimately want to see that valuation going up. It does imply what they physically kind of on paper own of this business. And so when a valuation is 100 million due to some infusion of 10 to $20 million of cash, a down round implies you’re going to do that at 80, at 70 at 50 half of your valuation, and that will signal to the market or you think it will signal to the market. You know, my company is not doing well. But again, I emphasize that that metric was a vanity metric. You could actually have revenue going up if you could talk about your revenue or talk about the amount of engaged customers or users or whatever that number actually might be going up. How about we get to a time and I think we might be entering that time where people talk about an actual business that is solving a customer’s problem and as a bunch of customers paying for that problem, does the way we solve that problem and by the way, that’s going up and right now the markets don’t see that and we understand that, but we have a long view. And so we raise that a down round, you know, 30, 20%, 60% down. But we have a long term view and we’re solving customers pain points and we will get there and eventually the valuations will catch up to underlying business performance. You’re an optimist. And one of the things that always inspires me in Silicon Valley is it is it’s a place for optimists. And even in these dark moments, people here are more optimistic than people outside the valley about the Valley’s prospects, about tech prospects. What gives you what gives you optimism? The biggest outcomes in tech happen at major shifts, And so us VCs, particularly those in Silicon Valley, have been waiting for a shift to happen for the longest time, and it was been a head fake in 2020, 2016, 2017. Well, now we have a real shift finally after 1213 years. So when there is an economic shift. Speaker 2 [00:08:56] Pair that with. Speaker 1 [00:08:57] A technological shift like the last time we had this was in 2008 was nine when there was also an economic shift combined with a mobile shift. We are seeing that with generative AI and this economic shift. And like when those two things happen, historically the best things are created. And so like we are giddy, like we are really excited that these moments have presented itself for the best values to take advantage of. So we’ve got a technological shift, an economic shift, a capital market shift, one might add to that. So the shift is on. The shift is on. Andre, thanks for being on disruptors. Pleasure to be here. Next up, I’d like to introduce Chris Arseneault. Chris has more than 25 years of experience and is the co-founder, president and CEO of Adobe Capital. Chris, welcome to Disruptors. Speaker 3 [00:09:45] Thank you very much, John. Speaker 1 [00:09:46] It’s great to be with you again. I don’t want to age you, but you have lived through a few tech market downturns and that includes the dotcom crash from way, way, way back when wondering how you’re seeing this one being any different. Speaker 3 [00:10:01] What’s interesting is that it’s totally different and it’s exactly the same. There’s a lot of elements that touches the emotional front of decision making for an entrepreneur and for an investor. That’s literally the same roller coaster that you’ll see in any events like this one. And at the same time, everything is different because all of the data is different, right? So you have to adapt. Speaker 1 [00:10:24] How would you describe most of your conversations with entrepreneurs as we look deeper into the year? Speaker 3 [00:10:29] So entrepreneurs are kind of like trying to figure out how do they stay in the driver’s seat, how and when to raise, what type of relationship do they really want to have with their cap table and their numerous investors? What has happened from our perspective over the last year is that entrepreneurs that had maybe five or seven investors on a cap table, they’re choosing one or two with who they’re really going deep, deep in decision making, deep in reviewing their strategy, reviewing their burn, considering lower growth, but with confidence, it’s hard to do reviewing their mains and how to basically build a company when everything is changing rapidly under their feet. Right. So I think it’s a unique time in the market to actually build strong relationships between investors and the entrepreneurs and between boards and the entrepreneurs, because this is a time where you have transparency like never before. You have honest. Russians. You have time to actually do due diligence. You have time to actually review what’s going on in terms of the plans of the of the business. And you have time to build trust. So this is a unique time to figure out with who you want to work with. And that’s equally for the entrepreneur as much as the investor. Speaker 1 [00:11:46] That’s a great expression. You have time to build trust. A lot of entrepreneurs may not quite see it that way as they’re scanning their cap table, thinking about which investors to spend more time with to try to deepen that trust. What sort of things should they be thinking through and looking for? Speaker 3 [00:12:04] Well, some entrepreneurs right now are still scratching their heads because their first time entrepreneur, they’ve only been in the market for the last 5 to 7 years and they’re like, hey, investors were willing to pay 30 times IRR. Why are they barely wanting to be ten times now? Like, why did that shift happen? And what does it mean for me, right? So building trust basically means understanding where the entrepreneurs are coming from, why they’re there, they’re interested in investing. We’re continuing to invest in your company, what they’re willing to do over and beyond, just putting in capital to help you become successful. Speaker 1 [00:12:39] For founders who are facing those kinds of pressures and no doubt lots more, what kind of advice do you give them just in terms of managing their own psychology, their own emotional state, but also their business brain through more challenging times than many of them have probably ever seen? Speaker 3 [00:12:54] We often talk about optionality, and optionality basically means a way for founders or the executive leadership team to stay in the driver’s seat. What does it mean? It means you have to take the hard decision in terms of your burn. And most of the company’s burn comes from compensation, right? So it’s the salaries that are the bulk of the burn of the company. So you have to take the harsh and hard decisions with regards to your own roadmap of product, of hiring, of letting go, reorganizing that helps you stay in the driver’s seat. You also have to decide what type of company are you going to be, not just now, but in the future. And sometimes in order to be able to be there and be in good shape, in order to execute on the long term vision of the company, you have to take different type of decision in the short term. And there’s no easy decision here. It’s tough. Speaker 1 [00:13:50] Yeah, nothing is easy right now, it seems. How long do you figure this will go on? Speaker 3 [00:13:55] Well, we already are starting to see a shift. I think there’s still going to be a lot of layoffs in tech this year because of companies that didn’t take the hard decisions last year. They burned through even more cash and now they’re forced to take, you know, decisions that are even more radical. So we will see more layoffs. But net net, we still came from an industry in a world that was hiring at high, high speed and at a higher pace. I just looked at the I know, a portfolio of active companies. At the end of 2021, the active portfolio had 15,000 employees. At the end of 2022, they had 16,000 employees. So even though there was over 2500 layoffs, we still net hired close to a thousand people. A lot of the roles that were let go either are finding jobs in other industries. Therefore, they’re we don’t expect that they’re going to stay on the market very long or they’re starting their own companies. So we already are starting to hear and see people that got laid off last year that are starting to own tech companies in 23. And we expect that by year end and for 2024, we most likely will see the biggest boom in startups in tech. In terms of growth numbers. Speaker 1 [00:15:13] That’s a really hopeful note to to wrap up on and incredibly sage advice from someone who’s seen these challenging times before. Chris, thanks so much for being on disruptors. Thank you. Speaker 3 [00:15:23] Very much. Speaker 1 [00:15:25] Up next, more predictions on the path forward for the tech industry direct from Silicon Valley. Stay with us. Speaker 2 [00:15:36] You’re listening to Disruptors and RBC podcast. I’m Naomi Powell. For generations, Canadian farmers have been financially rewarded for the food they produce. But what if we started also rewarding them for what they preserve? Our latest report from RBC Economics and Thought Leadership, called Fertile Ground, lays out three pathways to a more sustainable agriculture sector. Soil can be an economic asset for farmers generating more revenue by capturing greenhouse gases through sustainable practices. Farmers can unlock this potential while also protecting our land, our water and our air. But making it happen will require capital. To read the report, visit RBC dot com slash fertile ground. Speaker 1 [00:16:18] Welcome back. Today, we’re talking with Canadians who are living through the tech sector’s new reality. I’m at the C 100 Summit in Silicon Valley, surrounded by many of the industry’s top thinkers and innovators. Our next guest is Sherry Hash Jones, founder and managing partner at Sightline Coaching, an executive coaching firm based in the Bay Area. Sherry, welcome to Disruptors. Speaker 2 [00:16:40] Thanks. Good to be here. Speaker 1 [00:16:42] It’s great to have you here. And talking about talent because everyone is talking about talent in 2023. It was in many ways the most common thread through the C 100 summit. What did you take away? Speaker 2 [00:16:55] Well, I mean, it’s interesting looking at this year versus last year. And I feel like last year we were tussling with will remote continue. And I think this year it’s just really just continuing. The same story, which is remote is here to stay. The question is how do we as leaders and companies deal with this new kind of environment? And, you know, me and my work, I work with a lot of young leaders. And I think what we lose when we go entirely remote is the stuff around culture, around connection, around leadership development. Leadership is apprentice craft, right? Like we learn by watching other awesome leaders. And if you are only seeing a leader on a little square on your Zoom screen, I’m kind of concerned about how we actually help that next generation of leaders come up. Speaker 1 [00:17:43] One of my takeaways is, and I think we all see this, that hybrid, however you define that, is here to stay. And it’s really on companies and managers to optimize remote work using technologies and their rapidly growing, but also optimize in-person work. Make sure that you’re mentoring, coaching, inspiring in ways that even with the best immersive communication tools, you’re not able to be that true human perhaps. Yeah, that we are. Speaker 2 [00:18:09] It’s like in-person totally. It’s like human with a capital H and whereas that may have happened organically before because we were with our teams in person, they could watch how we work. I think now to your point, we need to be really intentional and almost create programing around it and be really intentional with our leaders that they are mentoring, coaching, making that a part of their of their bottom line in terms of how they’re working with their teams. Speaker 1 [00:18:34] Now, another factor that’s changed from last year is layoffs in the tech sector and job uncertainty. And we talked about that, how to communicate to teams who are perhaps nervous about their future, but also wondering how best to work in person or remote. What did you take away in terms of how leaders, founders, entrepreneurs can communicate with tech workers in this very different environment? Speaker 2 [00:18:57] I mean, what I heard was more communication and not less and more transparency, not less. If anything that we gained over the pandemic was, you know, showing up as human capital, age, human again. And, you know, our leaders can show up that way, too, and trust that our employees can have more of a seat at the table in terms of how things are going. I think that we really heard that from the CEOs who spoke the last couple of days, that, you know, there needs to be a level of trust there, a level of transparency that, yes, there’s going to be hard news. You can’t share everything. But the more that you share or probably that, the better the outcomes will be in terms of generating that trust in connection with your teams. Speaker 1 [00:19:39] How do you think this year is going to be different from last year or last several years from a from a talent point of view? Speaker 2 [00:19:46] I’m based here in San Francisco, so we’ve had a lot of layoffs in the tech sector. Having said that, we still have a lot of industries that are really booming. And so I think there’s a bit more pragmatism in how we hire being more selective. But, you know, if you’re top talent, there’s still going to be lots of opportunities for you to always be recruiting, right? I say this to all of my leaders. It’s definitely not something that you outsource to just your recruiting teams and be maintaining those networks. We all have eyes on top talent, right? This might be a time where folks are more open to moving and shifting. Speaker 1 [00:20:21] We also have heard about a hyper intensity of the year ahead, given economic conditions, the cost of capital, the challenges of the sector, and a lot of entrepreneurs and founders are being told you have 12 months to kind of get this this right. Hard to lead a team with that kind of pressure, but good leaders do what differentiates them. Speaker 2 [00:20:44] You know, my background was in consulting and I remember every minute counted, but the great partners were still those who could get in solve a problem. But we’re still taking time to develop along the side. So I think of it as, you know, double KPI. It’s not just, you know, what the outcome is, it’s how you’re doing it, because that’s going to retain the team longer term. And I think what we heard over the past two days is it’s not necessarily the pace of the work or the amount of the work that burns people out and gets people frustrated. It’s more about how the work gets done. And if you if you have a sense of purpose, if you’re feeling. Like you’re engaged. People are going to give their best. Speaker 1 [00:21:19] Whether in-person or remote. High fives have a value. I’m going to give you a high five sherry. Speaker 2 [00:21:24] Thank you. Speaker 1 [00:21:25] Thanks for being on disruptors. Speaker 2 [00:21:27] Good to be with you. Speaker 1 [00:21:28] Our next guest is Dominic Penaloza, founder and CEO of Peace, which offers on demand work pods in public locations. Dominic, welcome to Disruptors. Speaker 4 [00:21:38] Thank you, John. Thank you. I’m super happy to be here. Speaker 1 [00:21:41] You’ve had an incredible career journey, almost 30 years in China, and you’ve just been in lockdown in Shanghai for probably feels like 30 years and now you’re here in Silicon Valley. Give us a sense, Dom, first off the top of how different things are coming out of the pandemic in China from a tech sector point of view. Speaker 4 [00:22:04] Yes. So that part of the reason I said I am super happy to be here is because of the fact that this is my first trip in about three years. So I’m super grateful for that. I think the rate of change was so, so fast in China recently with the changes in the Zero-covid policy that things are still rapidly evolving. I think from the tech industry specifically, perhaps from the entrepreneurs perspective, there might even be more opportunity than before. This might be an interesting implication if there is a decoupling that is happening within tech. I suppose that might be bad for global efficiency, but it might be good for local opportunity because different teams have opportunities to build different products or similar products because of decoupling. Speaker 1 [00:22:53] I’m curious how you see things evolving in China, but also elsewhere because you’re innovating in the future of work spaces. Where do you think work goes as the world reopens? Speaker 4 [00:23:04] I think one of the fascinating events right now is that as I spend some time reconnecting back here in North America and I’m seeing for myself that everything I’ve been reading for the past three years about the remote work revolution, the hybrid work revolution, how approximately 30% of all American workers are now hybrid. So this is really a new normal and this is really a megatrend. And it’s quite real. It’s amazing to me because so far in China, it’s almost zero. So despite everything that we’ve gone through over there in terms of managing COVID and the great opportunity to work remotely during those periods for everyone, it’s fascinating that the reaction has been so different and basically everyone is scrambling to get back into the office. And so it’s still office five days a week as normal or as you’ve seen in the headlines from the last two years, even trying to get people to not do 996 the 9 a.m. to 9 p.m. six days a week. But everyone is still in the office and not much has changed in terms of workspace and how people work and the way that people interface within China. And so that’s fascinating to me. Speaker 1 [00:24:22] That that’s going to become a fascinating almost AB test in the world. If you have especially brain centers like Shanghai where you live that are all in-person and then other brain centers like here in Silicon Valley, where the occupancy in San Francisco is somewhere in the 20 to 40%. Do you think innovation is going to take a different course in China because of that in-person work habit that seems to be taking root again? Speaker 4 [00:24:49] I think that is a that might be $1,000,000,000,000 question, because if we’re talking about broadly innovation in general and the whole tech industry, maybe it will be better possibly, but maybe it will be worse. I think old school thinking tends to believe that we need to spend time together physically because a lot of innovation comes from those random collisions of ideas in the cafeteria, in the elevator, in the hallway, or at the watercooler. And so if that is happening, much less in the Western markets, will someone gain an advantage in terms of innovation If things are quite different in China, where everyone is still spending a lot of face to face physical time? Speaker 1 [00:25:37] I want to get your perspective as a serial entrepreneur. You’ve had a number of startups, many great successes operating in fast growth markets, particularly in Asia. As you look at the current environment, it’s really tough time for or for leaders, for founders, for entrepreneurs. What advice do you like to give people in these sorts of environments? Speaker 4 [00:25:59] The advice I’d like to give people is that if you’re a younger entrepreneur, perhaps you can take something from us more experienced entrepreneurs. I am encouraged to see that. It turns out in the latest data I saw that the age of 50 is the best time to start a company. And perhaps. The reason that is so is because by that age the person has been able to see several cycles. For myself, I was there at the beginning of the Internet and I also experienced the great dot.com crash, which gives me a certain kind of perhaps calmness or at least perspective when we talk about the current recent market shifts. And so I think having that kind of perspective will help you to be calm, to navigate your new company, or think about how to navigate your new company in these waters and knowing that these are cycles and entrepreneurs must carry on no matter what the cycle and to see the cycle as an opportunity. There are some silver linings of being in a tougher market for fundraising, for finding customers who have budgets to spend. Speaker 1 [00:27:08] These are cycles. Very wise words. Dominic, thanks for being on disruptors. Speaker 4 [00:27:13] Thank you. Thank you so much, John. Speaker 1 [00:27:15] That was Dominic Penaloza. I’d like to thank our other guest to Andre Charoo, Sherry Hatch Jones and Chris Arsenault. The tech sector is once again in a period of transition. Funding that once came easily is now scarce. The narrative has completely flipped Headlines about massive investments in tech, unicorns and IPOs have now become headlines about mass layoffs. Perhaps the only thing we can say with certainty is it’s going to be a bumpy road ahead. But, you know, those who fasten their seatbelts and keep their eyes on the destination will get there. And they may find they’ll get their way ahead of their competitors. Those are the real disruptors. I’m John Stackhouse and this is Disruptors, an RBC podcast. Talk to you soon. Speaker 2 [00:28:12] Disruptors, an RBC Podcast is created by the RBC Thought Leadership Group and does not constitute a recommendation for any organization, product or service. It’s produced and recorded by JAR Audio. For more disruptors content like or subscribe wherever you get your podcasts and visit RBC dot com, slash disruptors.

Speaker 1 [00:00:02] Hi, it’s John here. 2023 is already shaping up to be a critical year in the showdown over semiconductors, which are arguably the most important technology the world has seen in 50 years. They’re the size of your fingernail, and yet they power everything from your coffee machine to kitchen appliances to all those toys you might have seen at Christmas. They also effectively run the Internet through data centers and so much more. To state the obvious. Chips play a central role in the global economy, and we’re just getting going. We’re going to need a lot more chips in the coming years to run everything from electric vehicles to the Internet of Things in your home. And yet, as we’re seeing in the news every day, the factories that build them are largely located in one place, Taiwan. You know, the U.S. in the 1990 accounted for almost 40% of global chip manufacturing. And today that share hovers around 12%. The U.S. has started a kind of space race in the semiconductor world, but it will take more than a few months to change things. In fact, it took 30 years to move a lot of that production from the U.S. and Europe to East Asia. And it may take just as long to move it back. And while all this is going on, Canada is going to have to make some key decisions. Are we going to be a leader in the new supply chain of semiconductors? How can we fit into what the U.S. is doing through the massive CHIPS Act that is going to put hundreds of billions of dollars into semiconductor manufacturing and fabrication on U.S. soil? And what kind of innovative thinking can we bring to the next generation of semiconductors and chips? The question is not just where will chips be made in the decades ahead, but what kind of thinking and innovation is going to go into those tiny little things that power everything in our lives? This is Disruptors. An RBC podcast. I’m John Stackhouse. We’re recording this special episode of Disruptors live in Ottawa, where industry leaders, innovators and policymakers have gathered to figure out what role Canada can play in the semiconductor business of tomorrow. To get a hands on perspective, I’ll be joined later by Jim Keller. He’s the CEO of ten Storefront, a leading Canadian company that makes specialized chips for air applications. The first, I’m joined by Benjamin Bergin Benz, the president of the Council of Canadian Innovators. That’s a group that was set up by Jim Balsillie and John Ruffolo to champion Canadian innovation and all the entrepreneurs who are trying to disrupt everything around us. He’s also the coauthor of a thought provoking op ed that ran recently in The Globe and Mail called The U.S. is seizing the moment on chips and semiconductors. Why can’t Canada? Ben, welcome to Disruptors. Speaker 2 [00:02:56] Thanks so much, John, for having me. Speaker 1 [00:02:58] So, Ben, the U.S. is seizing the moment on chips and semiconductors. Why can’t Canada? Speaker 2 [00:03:03] That’s a great question. And I’m actually currently in Ottawa engaging with the federal government from a civil servant, but also a political side. And I think Canada actually can seize the moment. And so there’s this sort of, you know, cautious optimism that is kind of abound with me right now. And I think why we need to seize the moment is maybe the important piece. You know, this isn’t something where Canada has had capacity in a long time. And I think that’s a number of reasons. I think it’s the way that supply chains were created. I think it’s the way that the geopolitics existed in the eighties, nineties and 2000. But what has happened has been a dramatic transformation in the circumstances in which we find ourselves, where there is obviously concerns about what’s happening in Russia and Ukraine. There’s concerns about what’s happening in China and Taiwan, but also how that plays out with places like Japan and South Korea. And so the markets and capacity that actually produces semiconductors is being upended. And in this moment, in this crisis, there is an opportunity. And I really think that this is an opportunity Canada must seize on, because there is a tremendous amount of value that we can generate as a country for this. There’s an environmental component, right? Building ships that are more energy efficient will help us meet some of our targets in terms of clean technology and things like Paris Agreement, but also defense. And I think that this week has really demonstrated that with, you know, balloons floating across the ocean and us, do we have the capabilities to take them down? And semiconductors are a fundamental component of the economy. They will actually fuel all other areas in the innovation economy. And what I mean by that is that when we look at how we’re going to generate a I like catchy beat that requires a tremendous amount of semiconductor capacity, but also a tremendous amount of energy. Speaker 1 [00:05:04] And I really want to come back to that energy question because I don’t think many people appreciate what the era of chat chips, amongst other emerging technologies is going to do to energy demand literally at our fingertips. But let me start first with the CHIPS Act. We’ve been talking a lot, including on this podcast about the Inflation Reduction Act and probably overlooking its twin, which is equally important, and that’s the Chips and Science Act, which puts $280 billion on the table to in many ways reshore a lot of chip manufacturing, boost American competitiveness, innovation, national security. How on earth does Canada keep pace with that? Speaker 2 [00:05:45] The first step is we’ve got to get organized. We’ve got to figure out what do we have in terms of actual capability and actual capacity in this country. And that’s going to sound like a bit of a cop out of an answer. But here’s the thing. The federal government and provincial governments are actually spending hundreds of millions of dollars in semiconductors, whether that be through research and development or whether that be through other grants and other programs. Let’s take a country like the Netherlands, which has had a real cohesive policy and has made themselves indispensable in the supply chain of semiconductors, so much so that the Americans had to actually go to the Netherlands and back, beg them not to give the technology to China. Here is a small country, you know, smaller than Ontario, having the capacity to be able to say we have real strength in the supply chain. So what we need is a bit of coordination from government. And what we need is thinking about, you know, not right now, but ten years from now, where is let’s use a clean analogy, the puck going and how do we get there? How do we make some bets? And so the piece here is not that we need to match it dollar for dollar, but what we need to do is think about it in a smart way, about where the real value is in the supply chain. Speaker 1 [00:07:00] When I think of what Canada’s superpowers, if I can call them, that might be in the space. Certainly post-secondary education is one of them. We have centers like Toronto, what’s grown out of the University of Toronto that are equivalent to any of the great brain centers in the world? Is it not enough to simply develop the talent and let them loose to to pursue ideas? Or do we need to take a more directional approach to this? Speaker 2 [00:07:28] So on the talent piece of allowing it to flourish? God, no. This actually requires strategic thinking from people thinking about how and where we want to go. The idea of allowing it to just sort of be this organic structure is not going to lead to any actual outcomes. Look at any of the other countries. They have had a strong centralized government which has pulled forward areas where they can be successful. So places like South Korea focused on imaging chips. That is why Samsung is a titan and a giant and you cannot compete with them. If you look at what Japan has done, they have focused on another area. If you look at the Netherlands, it’s another area. So allowing sort of a thousand flowers to bloom is not the right answer here. And if we want to take a more Canadian example of why this policy doesn’t work, I suggest we look at the federal government’s A.I. strategy, which was similar in that node, John, where yes, we’ve got amazing people like Geoffrey Hinton and folks like Yoshio Bengio. And we thought, Let’s just give them money to build talent. Well, fast forward five years from then when that was first struck, we see that 80% of the intellectual property generated out of places like Vector have gone to large foreign multinationals like Microsoft. And so not only have we helped subsidize the R&D of foreign multinationals, but we have shut ourselves out of the future of fundamental intellectual property. And so my real concern here is that if we do that same thing in semiconductors, we’re going to find ourselves in the same situation. So to your point, John, yeah, we’ve got some really smart people. We’ve got some amazing academics. But if we don’t go from IP generation to IP retention to corporation building, we’re going to find ourselves or as the century continues to move forward. Speaker 1 [00:09:25] You suggest. Ben, we’ve got to start with an inventory. Figure out what we have. So beyond the inventory, what do we need to do in the coming months? Speaker 2 [00:09:33] So we are we’re already doing it to some extent, which is the good part. Industry is beginning to call us. And so the meetings we had in Ottawa were that congealing of the ecosystem. And so we brought together 15 really amazing semiconductor companies that are headquartered here in Canada. We’ve had outreach to close to 40. And we’re going to begin to pull together a document and a list of things that we need to begin building on. And it’ll have timelines. It will have a structure to it. And government has committed to participating in this discourse. And so the next step really is to figure out, sure, champions for our supporters and how do we move this forward. And I think one of the things that needs to really be communicated to Ottawa in this strategy is foreign multinationals will have to be somewhat involved in this discourse, but they cannot be at the center of it. So if, let’s say Minister Champagne or Minister Freeland goes out and announces, you know, $500 million in the budget to a foreign multinational to build a plant here, that should be considered an utter failure. What really needs to be focused on is how do you support these domestic firms to figure out where they can play in the supply chain and then give them all of the tools that they need in order to succeed? Because that’s actually how we’re going to build industrial policy in this country. Speaker 1 [00:10:55] But don’t you need those multinationals, a lot of them American companies actively involved in building up the Canadian ecosystem, just as we’ve seen with automotive over the decades? I think of Intel and, you know, the plant it’s trying to build in Ohio. Some estimates say it’s going to be 60 to $100 billion to develop that one plant. Well, it’s hard to imagine a Canadian company doing that. So why not bring intel in or any other company, for that matter, to be Tesla and have them working actively with your members, with Canadian entrepreneurs to build up that cross-border supply chain that we’ve seen fairly successful over the decades and in other sectors? Speaker 2 [00:11:40] So I would say ish. John Right. I mean, you’re talking about the auto sector, which was the tangible economy, not the intangible, where it was about the actual building of things, and it was really less about the intellectual property that went into it. And so my critique or argument is that the reality we are in is very different. This is about data. This is about IP ownership and all that basically doing in terms of bringing in a large foreign multinational to, let’s say, build a stop here will lead to low wage jobs in the semiconductor ecosystem. It is us playing for kind of bottom of the barrel. Speaker 1 [00:12:21] Then we could talk about all sorts of aspects of chips, but one that I do want to focus on that you mentioned off the top is energy efficiency, the way that things are going with Chad GPT. But that’s just one example. It’s going to create a new generation and demand a new generation of chips that are energy hogs on a level that we’ve not seen before. How does Canada help? Not just Canada through that, but the world? As we shift to much more advanced technologies, much more energy intensive technologies? Surely there’s a role there for Canada to to bridge? Speaker 2 [00:12:58] Yeah, no, look, I think that that’s a great question. And I’m not going to sit here and say I’ve got a fully baked up plan, but I’ll maybe throw a couple of trial balloons into the air because balloons are obviously the name of the game right now these days. One in this inventory that we’re going to do as a country, we’re going to find that there are some companies here that are making chips that are energy efficient. So one company that was at the table, zany, they make ships that are about 25% more energy efficient, but they also have higher capacity because of the way that they’re structured. So looking at what are opportunities in terms of energy efficient within our own ships industry, I think will be really, really critical. And how do we support them? How do we actually create those opportunities? So ultimately, it’s this kind of strategic thinking about it from various complex areas is how we, I think, to arrive at that energy component and I think is, you know, truly our responsibility as Canadians. Speaker 1 [00:13:57] Then you’ve laid down a gantlet for the country. I want to wrap up with some inspiration that you draw from your members when you’re with these incredible companies that many people may not have heard of. What inspires you? What are they doing that we can all get behind? Speaker 2 [00:14:14] So hopefully the way I’ve kind of communicated, but this hasn’t been Debbie Downer. I’m actually super excited about all of this and hopefully you can kind of share it in the center of my voice and that excites. It comes from the CEOs and the leaders in this space that I engage with. These are wildly smart people. These are wildly ambitious people. These are people who have decided to stay in Canada. And it’s their sort of continued dedication and excitement that fuels me. And when you hear about the things that they are building and their ability to see into the future of where we are going, not only as a country but as a planet, you get both a sense of urgency, but also a sense of how can we help shape it? Speaker 1 [00:14:56] Then you both challenged us and inspired us. Thanks for being on disruptors. Speaker 2 [00:15:00] Thank you so much for having me. Speaker 1 [00:15:04] That was Benjamin Bergen, president of the Council of Canadian Innovators. Stay with us. In just a moment, I’ll be joined by a global leader in semiconductors to get his take on Canada’s opportunity. Speaker 3 [00:15:20] You’re listening to Disruptors, an RBC podcast. I’m Theresa Do. I’d like to share with you our latest report from RBC Economics and thought Leadership called the next Green Revolution: How Canada can Produce more Food and Fewer Emissions. Global food demand is set to soar as the population rises to 9.7 billion people in 2050. Meanwhile, climate change is slowing the agricultural productivity of many major producers. And geopolitical upheaval from Russia’s invasion of Ukraine has destabilized the world’s food systems. Rarely has speed in the world presented such a daunting challenge. So how can Canada lead the world’s great effort to confront it? To find out, visit RBC Rt.com slash next Green Revolution. Speaker 1 [00:16:13] Welcome back. Today, we’re talking about the race to secure a homegrown supply of semiconductors. Canada used to be a leader. And while that may not be the case today, there’s all sorts of promising prospects out there, including ten store, which is based in Toronto. It’s my pleasure now to introduce the CEO of ten Story, Jim Keller. Jim, welcome to Disruptors. Speaker 2 [00:16:33] Thanks for having me. Speaker 1 [00:16:34] Jim, I want to start with your own background. You’re a well-known name in the semiconductor business. You’ve got an extensive career in processor design, worked on Tesla’s fully self-driving Chip, Apple’s A5 processors and served as senior vice president at Intel for several years. Take us into the ten storied story. How did you first come across the company? Speaker 2 [00:16:55] So the founder is Ljubisa Bajic, and he worked for me at AMD. I was working at Tesla at the time and I was his angel investor, so I gave him the first check that he and a couple of guys did the classic, you know, two years in a garage making that work. I stayed in touch. So we had a lot of conversations about, you know, the direction they’re pursuing, how their engine work, what they thought was great about it. But I wanted to get back in the start startup. And then rather than start an air company, I joined Canstar to work with the media because I thought his approach to it, his team were doing something especially good. Speaker 1 [00:17:30] What are the biggest challenges that you’re up against a ton store? Speaker 2 [00:17:33] The biggest challenges is the fundamental, you know, how do you build an air compiler and how do you build the hardware that works properly? It’s complicated for for some unknown reasons, and then that’s complicated for some novel reasons. The scale of the data that they want to process on is just immense. And then that data, you know, if it was a nice big chunks that you could process through, that would be great. But now it’s spread all over the place. Speaker 1 [00:17:56] And we’ve got chips in pretty much every aspect of our life from the coffee maker that gets us going in the morning to the vehicle that moves us around and way beyond that. The sorts of applications that Tenstorrent is perhaps looking towards. I’m guessing are going to be at the more sophisticated end of the spectrum. Speaker 2 [00:18:15] Well, in the short run, we’re targeting developers who want to write software and get faster and around, especially if they’re building novel models. We want to start aiming at smaller data centers where people own their own applications and they want to co-develop with us. But going forward, I computations going to end up with everything servers, and it’s going to be in phones, it’s going to be in game machines, like you name it, it’s going to be all over the place. It’s going to be ubiquitous. But to get to that point, you know, we need a lot of development. Speaker 1 [00:18:44] Does it matter where the development takes place? There’s a lot of debate about onshoring these days. Speaker 2 [00:18:51] Nothing is co-located in this world. And so the supply chain is so diverse. It’s just amazing. And you can say anything you want about where stuff comes from that comes from everywhere. When I was at Tesla, we had really good supply maps where parts came from, which half the countries in the world and you know, the distance parts move. It’s it’s really remarkable. Speaker 1 [00:19:11] Is that going to continue? Speaker 2 [00:19:12] Probably. There are centers all over the place. What you tend to see is the high end development aggregates. You know, Boston and Silicon Valley were big centers. Toronto is an unusual class because University of Toronto has produced many, many of the top AI researchers, compute researchers. And then I had was a great graphics company center in Toronto. Altera is an FPGA company in Toronto. Intel and a couple other people had HPC programmers there that built high end machines, so that core Tens torrent software team was this interesting mix of AI research, HPC, FPGA and graphics programmers, which actually was it was fairly novel to have such a diverse software set but all different kinds of high performance problems. So you so you see you need critical mass to get going, but rather the software development, the hardware development and the sourcing and supply chain are very different things and they’re spread all over the place. Speaker 1 [00:20:10] What does a country like Canada need to do to keep that advantage and more importantly, build on it? Speaker 2 [00:20:15] Well, it’s interesting. You know, our team is very diverse and Canada opened their arms to people from Eastern Europe, from the Middle East, from India. And so that to build up a big technical pool. But the reason they went there to start was University of Toronto. And way back, if you remember Nortel, there was quite a number of tech companies in the networking space that established. And so you see this kind of multi-generational thing happen, like that technology wave that was big and one generation kind of built the infrastructure that the next generation took over. The Prime is an interesting place, the big metropolitan city. And you know, because of their policies, they attracted like say, an outsized percentage of people looking for a good place to go live and do development work. Speaker 1 [00:21:03] One of the challenges with Canada’s air strategy has been commercialization of a lot of the ideas coming out of places like U of T, And there’s some concern that Canadian businesses aren’t doing enough to tap into that in the air ship world. Does that matter a whole lot or are you just selling to and developing for ambitious companies wherever they may be? Speaker 2 [00:21:26] There’s two answers to this. One is, are you funding the fundamental research capabilities and startup funding so things can get going? That’s separate from picking winners. So you say, well, we need the pixel winners. Well, good luck with that. The marketplace 100 people start to finish helping the supply side. There’s good research institutions. There’s good support for students who want to study at their support for startups or who want to get going. Canada’s support tends to aren’t really well. I know they’ve assisted us in hiring people. They’ve funded universities which source great students. They create an environment where a whole bunch of people want to be. On the whole, we’re pretty happy with our Canada work. Speaker 1 [00:22:09] When you see very significant investments like the CHIPS Act in the US, is it a game changer or is that just more kind of politics around the sector? Speaker 2 [00:22:20] My my guess is it’s a good thing to have a national policy when they start spending large amounts of money. What happens is the companies who have a lot of money and have the ability to lobby for it will get a lot of that money. So there’s never been a revolution in tech or giving money to existing players, did they? There’s no example of it. So having a policy that says, you know, we have the right policy is about immigration, that the right policy is about import export, the right policy about taxation, that that creates the playing field. But, you know, way back when, you know, lots of people were giving IBM money to develop PCs, they contracted out to Microsoft. Right. The start up and so on that one. Speaker 1 [00:23:01] So is that going to be the same in chips as anticipated? Speaker 2 [00:23:04] Well, it’s always complicated because the money goes to the big companies and they hire people and try and do stuff and then they get frustrated and they go quit and they start a company and, you know, who knows the pedigree. Speaker 1 [00:23:17] And you’ve made the point that one of the best investments country and a government can make is in the education system, especially post-secondary education. Speaker 2 [00:23:25] I’m a fan of people who go to college and are so excited about work and they quit a semester early and they want to go do a hands on stuff and coding and all that. You know, speech patterns are good for some people, but they’re a waste of time for a lot of people. So it’s hard to say how that works out. Speaker 1 [00:23:39] Jim, as we move towards close, I want to get your thoughts on the geography of the chips world, because that’s in some ways what’s sparked this episode and the debate about reshoring, semiconductors. If you can think out five or ten years, do you think the chips landscape is going to be fundamentally different now? Speaker 2 [00:23:58] It’s really complicated because there are so many kinds of technology. You know, I talked to a few people about, you know, we need to bring, you know, chips back home so we can manufacture stuff. And I was thinking, are you trying to make more refrigerators or are you trying to make iPhones? Because those are really different technologies. Like, even in a server you look inside or it’s a power supply or power transistors, there’s all different kinds of technology. So you have to think hard about what you’re trying to impact. So I think, you know, the recent, you know, political stuff and funding stuff has made people think hard about it. But I think that’s what a lot of people took away from. This is like diversity of supply chain and actually knowing where your stuff comes from. Yeah, I think that’s going to be really important. Getting it all in the same place, that’s going to be possible. Our supply chain is already global, international, diverse, and that’s partly because there’s there is way more different pieces of technology in everything we do than you think. Even if you buy one chip, there is a thousand companies behind that chip. And so how are you going to bring 2000 companies onshore? Speaker 1 [00:25:03] Jim, I wonder if you can leave our listeners with a sense of where you think chips will take us. Go out five, ten years. What will be the big differences? Speaker 2 [00:25:11] Well, first, you know, in the big data centers and stuff today, it’s like 5 to 10% of the compute that’s going to go to 8090. So that’s a really big change. And whether that’s five years or ten years, it’s hard to say. But directionally, it’s going to happen. There are so many pieces of software you interact with today that are so clunky and painful to use, and there’s going to be a big wave of start ups building all kinds of user experience software that’s actually better. Now, whether it stays better, that’s another question and we’ll see what happens. You’ve already seen the stuff that like the ability to create imagery, the ability to create language, to build it, use it to assist in writing. That’s going to be become pervasive now, just like, you know, there was a point when you finally knew a lot of people who used a word processor to write stuff. Pretty soon you’re going to know a lot of people use A.I. to write. You know, it’s one of those technologies. There’s no going back. Speaker 1 [00:26:04] Jim, thanks for being on disruptors. Speaker 2 [00:26:05] Great to talk to you. Thanks. Speaker 1 [00:26:08] That was Jim Keller of Tenstorrent. I’d also like to thank Ben Bergin, president of the Council of Canadian Innovators, who joined us in the first half. As we’ve heard, semiconductors affect every facet of our lives, and they’re going to play an even greater role in the future. A large majority of them are made far away in a place whose future is, at best uncertain. Building domestic manufacturing facilities may be difficult and it may be expensive, but it’s clearly a race. Canada can’t afford to sit out. We need to make our mark. And today we talk to people building the industry in the hopes of doing just that, putting Canada again on the semiconductor map. Join us next time for a special live on location episode at the C 100 Summit in Half Moon Bay, California. I’ll be in Silicon Valley getting the Canadian perspective on the tech sector’s new reality. Until then, I’m John Stackhouse and this is Disruptors, an RBC podcast. Talk to you soon. Speaker 3 [00:27:10] Disruptors, an RBC Podcast is created by the RBC Thought Leadership Group and does not constitute a recommendation for any organization, product or service. It’s produced and recorded by JAR Audio. For more disruptors content, like or subscribe wherever you get your podcasts and visit RBC dot com slash disruptors.

Speaker 1 [00:00:01] Hi, it’s John here. And today I’d like to welcome back a special co-host. Naomi Powell is our managing editor of economics and Thought Leadership. She’s at the helm of many of our teams, major research reports. Speaker 2 [00:00:13] Thanks, John. It’s great to be back. Speaker 1 [00:00:15] It’s great to have you. Speaker 2 [00:00:16] So you are just back from the World Economic Forum in Davos, Switzerland. This was the first time the event has been held in-person, at least in a few years, thanks to the pandemic. I’m interested to know what it was like and what were the key moments that you took away with you when you came back to Canada? Speaker 1 [00:00:33] Well, talk about ironies that a couple of thousand people at least flew or traveled by whatever means to this little town in the Alps when we’ve just been through a crash course in doing so much remotely. In fact, I was thinking the last major international conference in some ways was the World Economic Forum in 2020. And then the pandemic hit and everything was supposed to change, including how we approach conferences. Speaker 2 [00:01:00] Yeah, I was thinking the same thing. COVID 19 was supposed to spell the end of conferences like this, and that didn’t happen. You’re right. We’re in more of a hybrid world and we’re still trying to figure out how that works. But I do think there’s a sense still out there, after everything we’ve been through, that if you’re going to hold a big in-person conference like the one you just described with hundreds of people flying in, it has to count. So what was accomplished, do you think, in-person that couldn’t have been accomplished virtually. Why does an in-person Davos still matter? Speaker 1 [00:01:29] I think there is a human interaction that just doesn’t happen on Zoom or whatever your preferred platform is. You do bump into people. You do have more honest conversations in person. And while Davos has this image of being elitist and, you know, in many ways it is it also is impressive how many people from different parts of the world come and get to interact. And I’m not just talking about businesspeople, artists, community leaders, scientists who wouldn’t be on those Zoom calls with CEOs or with government folks. I’d say if there was kind of a major accomplishment at this Davos, it was a reckoning with IRA, the Inflation Reduction Act, the monumental piece of U.S. legislation that has really accelerated a lot of clean tech investing. I didn’t appreciate until I was there just how rattled the Europeans are by this. I mean, this has been an existential challenge. Europe has fought for decades that it is the leader in renewables. And suddenly America, the great champion of fossil fuels in many European minds, is the champion of renewables, while also being the champion of fossil fuels, especially of oil and gas. The commitment to Ukraine was also pretty important. And while a lot of that has advanced through electronic and digital communications, there’s nothing like people being together to really solidify that. And government leaders, especially from North America and Europe, did come together and recommit themselves to Ukraine, not just for the year ahead, but for the years thereafter. One thing that did stand out to me is that all roads lead back to technology, whether it’s the climate crisis, the war, or ensuring the world’s population is being fed and fed sustainably. The development and implementation of technology is always at the core of how we’re going to tackle global challenges. Global problems do require global solutions, and this year’s Davos theme was cooperation in a fragmented world. And from what I saw, cooperation may be more needed, but it’s also more aspirational than ever. This is Disruptors, an RBC podcast. I’m John Stackhouse. Speaker 2 [00:03:55] And I’m Naomi Powell. John, I have a feeling you have a lot to tell us, so let’s get straight into it. Our audience, the disruptors audience is always keen to hear about technology. What can you tell us about the kind of presence that Tech had at Davos this year? Speaker 1 [00:04:15] Well, Davos has been the great champion of the so-called fourth Industrial revolution. This idea that advanced technologies, especially artificial intelligence, are really transforming every sector and a lot of aspects of society around us. And that’s a theme we’ve been engaging with on disruptors for a number of years. That’s coming to a head with a lot of economic realities. Many in the tech world have not lived with high interest rates, and they’re now seeing that. They’re now hearing from investors that they’ve got to operate their businesses differently and they’ve got to think about innovation differently. So that kind of collision of tech ambition and economic reality was really visible in in Davos during the forum. Big tech companies like Microsoft and Amazon announced tens of thousands of layoffs, giving a indication of the mood in the tech world. And yet at the same time, there were scientists and technologists there showcasing how quickly artificial intelligence and chat are moving in all sorts of spheres. And that’s not going to slow down even in a tougher economic environment. The science and technology is that powerful. And if there was a message certainly to business operators and business leaders at Davos, it was do not take your eye off the fourth industrial revolution as you’re perhaps managing a bit more tightly through a recession or near recession because your competitors, rivals or innovators, wherever they may be, are going to be doing some pretty extraordinary things this year. Speaker 2 [00:05:51] So what does that mean? What sorts of tools to leaders have at their disposal to spur that along? Speaker 1 [00:05:57] Well, Chat GPT is the favorite topic, maybe topic du jour, but it is really starting to disrupt fairly basic aspects of lots of businesses call centers, for instance, where chat bots we’ve had for years, but they’re becoming much more sophisticated. And in fact, it’s during economic downturns or tight economic periods where legacy businesses start to look very aggressively at transformative technologies, not just for innovation, but for cost savings. And I suspect we’re going to see more of that in in the year ahead. Speaker 2 [00:06:31] But exciting. So the war in Ukraine, you mentioned it before, it’s still a big global issue and it’s going to continue to be as we enter into the second year of the war. What was your sense of how leaders are looking at this second year? Speaker 1 [00:06:44] Well, it was impressive how resolute certainly European and North American leaders are to stand with Ukraine, a common phrase as for as long as it takes. But there are concerns. There are concerns that, you know, another year of war is not only going to be costly, first and foremost to Ukraine and Ukrainians, but to the many allies who are funding the war and supplying weapons. Can that go on for another year, especially if there is a recession in the West? That question is being asked, how determined will Russia be with the expected spring offensive? Will it be an all-out assault? Will there be weapons that we all have feared might be used? What will Russia throw at us? And I think the Ukrainians are very mindful of that. But their European allies are also starting to think through the consequences of that. One aspect of the Ukrainian war that I didn’t fully appreciate until I was in some conversations at Davos is how sophisticated the fight has been in the cloud. We’ve never had a war on this scale during the cloud computing era, and we’ve got a lot of serious players who are engaged in this kind of cyber warfare, including the United States. It was interesting to hear from companies like Cloudflare, which is a major player in the cloud that has worked with Washington, with American intelligence organizations, as well as with Ukrainians, to both contain what Russia might do in the cloud, to shut down Ukrainian digital operations or the Ukrainian Internet, but also to create space for Russians who want to get beyond the cyber controls of the Kremlin. I witnessed an incredible conversation with Cloudflare’s Matthew Prince. Here’s a clip. Speaker 3 [00:08:34] Yeah. So if we go back to a year ago today, we were starting to see in Derbyshire coming out of the region. That made us very worried that Russia was going to invade. And so we immediately reached out to authorities that we work with, got in contact with the Ukrainian government and provided our services to protect their critical infrastructure from cyber attacks. When the invasion actually happened, we terminated. Any Russian government affiliated customers from using our infrastructure. And then we worked with law enforcement and experts to say, what do we do next? And while there were some calls for us to pull out entirely what we saw when we talked to the U.S. government, when we talked to European governments, was that there was an important need for organizations like Navalny’s group Bellingcat, which is a Cloudflare customer, to be able to still get their message out. And they are themselves constantly under attack from Russian authorities. And so in order to protect them, we had to have some of our infrastructure still running inside of the country. And we made that determination that that was the right thing to do. Speaker 2 [00:09:50] That’s incredible. So a Silicon Valley company was able to tip off the authorities of an invasion. Speaker 1 [00:09:56] Yeah. Welcome to the second battlefield, as many people called it. And this is kind of the war of the future. It’s also the war of the present. It is being fought with artillery and humans, but is also being fought in the cloud. Speaker 2 [00:10:09] So, John, what about energy? We’re in the midst of an energy crisis. You know, Western sanctions against Russian oil and gas has accelerated that. And it’s also complicated, an already tricky transition to greener fuels. So Europe has so far managed to avoid an energy crisis. Can you give us a sense of how it’s managed to pull that off and what’s next? Speaker 1 [00:10:30] Well, a bit of international cooperation, some strategic planning and luck, I would say, is how Europe has pulled this off there. There was a great sigh of relief at Davos that the energy crisis has not expanded or been as acute as many had expected. In fact, gas prices are down to pre-pandemic levels in Europe, and there seem to be enough supplies to see Europe through probably this calendar year. But everyone’s worried about next winter. How did Europe get through this winter? Well, warm weather helped a lot. China being in lockdown was a huge factor because China is a major gas importer and a lot of those supplies were diverted to Europe. And then there was significant cooperation, particularly with the United States, to get not only American gas, but gas from American allies to Europe to ensure that it got through this winter. Can all that happen again? Well, maybe some of those forces can be replicated, but there’s no control over weather. And if Europe is hit by another blistering hot summer or a freezing cold winter next year, it’s going to be a lot more challenging all the more so if China is back in the international energy market. Speaker 2 [00:11:41] So Europe’s talking about doubling its current renewable energy capacity. Speaker 1 [00:11:45] It’s ambitious and it’s interesting to hear the Europeans, led by the Germans saying we are going to be all renewables by, you know, mid 2030s, maybe even 20, 30. But when you talk to, you know, people who have to literally get shovels in the ground, they’re reminding us as well as Europeans, that Europe doesn’t move that quickly, especially on major projects. Europe has a reckoning under way in terms of its approach to regulation, which ironically was one of the reasons Britain pulled out of out of the EU was just the heavy regulation. Well, that’s holding up some some important renewables development. There’s also supply chain challenges, which we keep hearing about, but there isn’t enough skilled labor or basic materials like steel to build new wind farms or LNG import terminals that are needed to help with that transition. But one thing that was absolutely clear from the Europeans is that they are going to spend whatever it takes to keep pace with the United States on renewables. Whether they can change regulations or not is another matter, but the money will be there. And that was said quite clearly by Ursula von der Leyen, the president of the EU Commission. Speaker 4 [00:12:56] That means that together the European and the United States alone. Putting forward almost €1,000,000,000,000 to accelerate the clean energy economy. This has the potential to massively boost the path to climate neutrality. But. It is no secret that certain elements of the design of the Inflation Reduction Act raised a number of concerns in terms of some of the targeted incentives for companies. So this is why we have been working with our United States friends to find solutions, for example, so that EU companies and EU made electric cars can also benefit from the Inflation Reduction Act. Our aim should be. To avoid disruptions in transatlantic trade and investment. We should ensure that our respective incentive programs are fair and mutually reinforcing. And we should also set out how we can jointly benefit from this massive investment, for example, by creating economies of scale across the Atlantic or setting common standards. Speaker 2 [00:14:21] So critical to the eBay’s and the other clean tech that von der Leyen was talking about are semiconductors. And I’m glad you raised supply chains earlier, John, because one of the things that was supposed to have happened by now after the pandemic is there were supposed to be a lot of reshoring, of manufacturing, of these goods. That hasn’t really happened. Speaker 1 [00:14:40] You’re absolutely right. Naomi There is a gap between rhetoric and reality on a number of these files, but supply chains in particular, we have all heard the rhetoric about the need and desire to move chip production from Taiwan, particularly to the United States. Some of that is underway. Big companies like Intel are building facilities in North America and Europe. But even the CEO of Intel said it took decades to move the locus of the supply chain for chips to Asia. It’s going to take decades to get it back to to the west. And of course, the EV revolution is going to accelerate. So where will the chips come from for all these electric vehicles coming onto the market? It’s important to note that the electronic content and the chip content in EVs is significantly higher than in the current generation of automobile. So those chips are going to be critical to the EV supply chain, and the manufacturing of them is not going to be on American soil probably any time soon. So a couple of things are happening. First of all, chip companies are working with kind of the last generation of chip manufacturing, which is more prevalent in in the West and trying to upgrade that and also work with EV parts makers to make them, frankly, a little less demanding in terms of what chips can do. And then in the spirit of ensuring that word, we hear a lot of there’s other countries, India first and foremost, that are really trying to make a move on this change. India is very proud that it has been winning mandates for products like the iPhone and is spending a huge amount to get semiconductor and chip manufacturing to shift to India. So game on. It’ll be interesting to see how the the geopolitics of Chipmaking continue in the years ahead. Speaker 2 [00:16:39] Okay. We’re going to take a quick break. But coming up, more of our conversation with John Stackhouse and his rundown of the World Economic Forum in Davos. You’re listening to Disruptors and RBC podcast, I’m Trinh Theresa Do. I’d like to share with you our latest agriculture report from RBC Economics on Thought leadership, called the Transformative Seven Technologies that Can Drive Canada’s Next Green Revolution. In it, we identify seven key agtech innovations we believe can both meaningfully reduce emissions and present opportunities for Canada to lead. Some, like anaerobic digesters, carbon capture and precision technology, are ready to scale now. Others, like vertical farms, plant science and cellular agriculture, will be key solutions. Speaker 4 [00:17:30] For the future. Speaker 2 [00:17:30] In every case, maximizing their potential will mean building the right platforms for collaboration among not just farmers and entrepreneurs, but also investors, corporates and governments. To learn more, visit RBC E-commerce Transformative seven. Speaker 4 [00:17:48] Stephen King’s manuscript for Carrie was rejected by 30 publishers before selling a million copies in its first year. Lisa Kudrow was told she wasn’t gorgeous enough for television before becoming the highest paid actress on TV. And Breaking Bad was rejected by four major studios before breaking the Guinness World Record for highest rated TV show of all time. On We regret to inform you the Rejection Podcast. We walk you through their incredible journeys, extract the insights and uncouple shame from rejection one story at a time. We regret to inform you the Rejection Podcast. Speaker 2 [00:18:30] Welcome back. John, you had a front row seat at the World Economic Forum in the Alpine village of Davos. I read that China was notably absent this year, or if at least not absent that much more quiet than they have been in the past. That’s a pretty big shift in tone from, you know, pre-pandemic Davos, when Xi Jinping, sort of emboldened by this booming Chinese economy, came out swinging at the West. What can you tell us about that? Speaker 1 [00:18:54] You’re absolutely right. It seems like yesterday, although it was five or six years ago when President Xi was there, saying essentially we will fill the void created by Donald Trump’s America and America first thinking. You can count on China to help the world through the climate transition, to help the world through energy changes. You don’t see that. You don’t hear that in Davos. Certainly not. Not this year. In fact, the leading voice for China was there in some ways to make amends, to reach out to the West and say, we don’t want a trade war. You probably don’t want one either. But it was very interesting to hear a Chinese leader. And in this case, it was Liu Hay, the vice premier, called for a dialing down of the Cold War rhetoric to call for more open trade and investment. And to suggest that China wants to work with the West. Also interesting to hear a number of Western political voices, including from the United States. Republicans and Democrats say, no, we’ve kind of moved on and we don’t want to be as nearly cooperative with China as we were a decade or two ago. Now, some of this is politics that plays well on Main Street in a lot of countries. Business, trade and investment continues to thrive between America and China and Europe and China. So reality and rhetoric may have a bit of a gap there, too. But I think we’re going to see this chill between the West and China for a good while. In fact, one of the warnings I heard repeatedly the West was how China may be a greater security threat to the West than, let’s say, Russia. And those threats are often in cyberspace. And we’ll probably see even more concerns raised this year about what China may be doing. Speaker 2 [00:20:37] What do you think is behind that softening in tone from China? Is it just that their domestic problems are becoming so overwhelming right now that they’re not up for posturing on the world stage? Speaker 1 [00:20:48] We’ve heard the warning that China will grow old before it grows rich. For a number of years, and that is playing out. We’ve seen this intersection of demographics and economic growth. And the Chinese are very worried about that. How are they going to support sustain an older population? How will they keep the economy humming with fewer people? Well, it’s going to take investment. It’s going to take technology and it’s going to require trade. They will need the world’s major economies buying more sophisticated products from them in the years ahead. So that’s going to require a different and more open approach to trade. Speaker 2 [00:21:28] So China, like a lot of countries, is very much focused on tech. China needs the West to buy the technologies that it’s working very quickly to to develop. So do other countries. We need tech to make a lot of things happen for us, the green transition and beyond. But this requires innovation and a lot of it. So who is at the forefront and where does Canada rank in terms of our innovative capacity? Speaker 1 [00:21:53] Well, I think it’s clear that the innovation leader and the planner continues to be the United States. It is firing on all cylinders in a whole range of sectors, fueled, if you will, by that Inflation Reduction Act. It is extraordinary how much investment capital is shifting to the United States. How many people who want to be pioneers in agtech or in building technology or in artificial intelligence are shifting or returning their focus to the United States, because that’s where the greatest opportunities are. As we were discussing earlier, Europe is trying to catch up, and that’s going to be interesting to see, see what it does. And China, you know, it hasn’t shut down its innovation machine, but a couple of years of lockdown have really been a setback. So it’s got slow economic growth. It’s got a society that is no doubt scarred by those marathon lockdowns. And it’s got a whole bunch of customers and trading partners who are not as cooperative. So I suspect we’re not going to see innovation coming out of China like we might have a few years ago. And we’ll see the United States continue to really tower over a lot of a lot of global innovation. What a great opportunity for Canada. We’ve got an open border. We’ve got common cultures and a common language. We have engineers and entrepreneurs who go back and forth. We’ve got Americans investing in Canada and Canadians investing in the United States with a freedom that you don’t see. In many other parts of the world. But Canada, like Europe, is going to have to really come to grips with whether we’re doing enough to play at the level that the United States is playing at. I think we’ll see in the federal budget, presumably in March, a number of commitments that try to up Canada’s game in terms of tax incentives and fiscal spending. But one of the quiet concerns has to be our own regulatory pace. We don’t move as quickly as we need to in terms of approving projects, approving investments, scaling opportunities. There are improvements, but there’s going to have to be a lot more if we’re going to move at pace with where the U.S. is going. Speaker 2 [00:24:17] You know, another issue that the U.S. is going all guns at is food insecurity and cutting emissions in the ag sector. That’s something you’ve looked at a lot on this podcast. What was being said about that in Davos? Speaker 1 [00:24:29] Quite exciting to see agriculture as a point of focus for so many business leaders as well as government leaders. I think one of the Awakenings last year was how fragile food systems can be in many parts of the world, including our own. We all saw shortages on the grocery shelf and don’t want to see a lot of those in the future. At the same time, I think a lot of countries are realizing that producing more food could come with more emissions. So how do we address that? Well, the best way to address it is through agriculture, because soil, it’s the new gold soil is going to be capturing a lot more greenhouse gas emissions in the years ahead than it has in the past. And there’s a lot of innovation going on in Europe and the United States and Canada will be accelerating this, I suspect, in the in the months and years ahead that allow us to see large swaths of land and of soil used for an economic advantage, but also for a climate advantage. Fertilizer was also a big topic of conversation, as we heard from Sven Tori Hall Sutter. He’s the CEO of Yara International, a Norwegian chemical company that produces, distributes and sells nitrogen based mineral fertilizers. Here’s what he had to say. Speaker 3 [00:25:44] What are we really as a fertilizer company? Well, we are replacing nutrients that we removed from the field when we take the crop away. Right. And if there’s no value to nature, well, then you mine the soil of its nutrients and you leave that behind. Then you move on and you destroy nature to get to the nutrient because that’s free. But if it rodders, think about it from a business perspective that we put back, that the nutrients be removed, not more, not less. And think about this more as a soil health perspective, healthy soil, healthy crops. Then we have a very different business model. And so for us, this has been a trigger, but we’ve already been preparing for this. Speaker 2 [00:26:25] Yeah, that’s fascinating. I do think this is one area where Canada has all the assets. It needs to be a leader and a leading voice. So as we come to a close, John, how did Davos leave you feeling about 2023? Speaker 1 [00:26:37] Well, it’s going to be a risky year, starting with the global economy. We may or may not have a recession in many parts of the world, but at the same time, we’re probably going to have higher interest rates for longer than we might have anticipated even a few months ago because of labor shortages, because of these supply chain challenges and because of the determination of central banks not to get it wrong this time in terms of fighting inflation. So that creates a bit of a tenuous economic environment for a lot of investors. But, you know, it’s at times like these where the advantage goes to the brave, to the courageous, to people who are able to look beyond the current year, to the growth that will follow in 2024 and beyond, and be making the changes, the investments, the commitments this year that will put them ahead of their competitors. There’s also geopolitical risks out there, and the one that I kept hearing about that isn’t getting a lot of headlines is Iran. We all know about the protests in Iran and perhaps the the fragility of the regime there. If Iran wobbles more in the coming year, that’s going to have a big disruption on global markets, including oil. It will destabilize the Middle East, maybe for the better, depending on your point of view. But is another risk that we have to sort of factor into how we see the year ahead. Speaker 2 [00:27:57] It’s interesting. So it’s a year to be bold. You published a piece summing up your thinking on Davos on RBC Economics website, where you also describe it as a year to hold your ground. Speaker 1 [00:28:07] Yes, that was a clear message from a lot of business leaders that they may not be bullish about the year ahead, but they are optimistic things will accelerate perhaps in 2024. But that’s why you hold your ground today. Don’t see ground and start to look for those critical investments and opportunities that will allow you to really make a move in the years ahead. Speaker 2 [00:28:28] John, this is such a pleasure. It’s one thing to read about Davos and all the things that go on there. It’s a lot different to talk to somebody who’s been there and can share their impressions firsthand. Thank you for doing that today. Speaker 1 [00:28:39] Absolutely. My pleasure, Naomi. Speaker 2 [00:28:41] And thank you also for inviting me to co-host today. I’m Naomi Powell. Speaker 1 [00:28:45] And I’m John Stackhouse. This is Disruptors, an RBC podcast. Talk to you soon. Speaker 2 [00:28:52] Disruptors, an RBC Podcast is created by the RBC Thought Leadership Group and does not constitute a recommendation for any organization, product or service. It’s produced and recorded by JAR Audio. For more disruptors content, like or subscribe wherever you get your podcasts and visit RBC dot com, slash disruptors.

Speaker 1 [00:00:01] Hi, it’s John here. Happy New Year and welcome back. We’ve been warned for years that the point of no return is coming. Sea levels are rising. The Earth is warming. We’ve seen thawing permafrost and large scale die offs in coral reefs. And even parts of the Amazon are experiencing increased episodes of drought. Okay. That’s a lot of despair. But guess what? There’s also hope. We know the problem. And more than ever, we know a lot of the solutions. Critical policies are actually in place and a very key element. Money is on the table to fund innovative technologies that can change our world. The US is making its largest investment ever. The European Commission has pledged to mobilize at least €1,000,000,000,000 in sustainable investments over the next ten years, and Canada is ponying up, signaling the next federal budget, along with commitments from key provinces, could set the course of public spending on climate for years to come. But it’s not enough. Now it’s time for the private sector to put those billions of dollars to work and add many billions more. The future is here. The question is how can we disrupt it before it disrupts us? This is Disruptors. An RBC podcast. I’m John Stackhouse. Today, I’ll be speaking with two people who decide how billions of dollars are invested in green tech. I’ll be joined by Elliot haTO, a managing director at Beyond Net Zero, a global growth equity firm with $73 billion under management. But first, I’d like to introduce Dr. Andrew Steer. Andrew is the president and CEO of the Bezos Earth Fund, created by Jeff Bezos in 2020. It has $10 billion that has to be disbursed as grants to address climate and nature within the current decade. Andrew, welcome to Disruptors. Speaker 2 [00:02:07] Thank you very much, John. Speaker 1 [00:02:08] I want to start with the Bezos Earth Fund. What is it? And maybe give us a sense of the vision behind it? Speaker 2 [00:02:14] Well, Jeff Bezos allocated $10 billion to be spent down this decisive decade on the challenges of climate change and nature. And so it’s an exciting venture. It sounds like a lot of money and it is a lot of money. But actually, compared to the need, of course, it needs to be leveraged so that we can get real change because this is the decade that will determine whether or not we succeed or fail. Speaker 1 [00:02:43] So is it that critical that those sorts of investments, that scale of investment be made this decade? Because if it’s made a decade hence, it’s too late? Speaker 2 [00:02:53] Well, next decade will also be critical. The problem is, if we don’t do it right this decade, it will be impossible to do next decade. So that’s why this decade is is really absolutely critical. We we simply have to get down to net zero. When we talk about climate change and we simply must reduce the incredible loss of nature which is going on at the moment because these two problems multiply themselves and we’re heading to a bad place. We live in this highly paradoxical world, don’t we? We have never had the progress. You know, the average person today lives 20 years longer than when I was born. Poverty has fallen from 80% of the world’s population to less than 10% of the world’s population. Amazing achievements. But the price we’ve paid has simply been too high in terms of losing species, losing natural habitats, polluting the atmosphere. And we can do better. Speaker 1 [00:03:56] And Jeff Bezos, I mean, he’s celebrated widely for a level of thinking and ambition that is all too rare in this world. Can you give us a bit more sense of how that ambition applies to climate work? Speaker 2 [00:04:08] Well, I mean, it is wonderful, isn’t it, that wealthy people decide to give back. And it’s wonderful how a growing number of high net worth individuals are seeing these big problems that are needing to be addressed. And Jeff Bezos himself obviously has a way of thinking. I mean, he is somebody who has taken on problems that at times seem impossible and systematically gone about addressing them so that we now have the ability to do things that we couldn’t do before, having really transformed entire industries. And so bringing that mindset to these incredibly, you could say, wicked problems, solving climate change is the greatest collective action problem, as many have said sort of in the history of the world. It’s got everything that makes it difficult. It’s got into temporal inequities, it’s got current inequities, it’s got deep moral issues, it’s got massive technological issues, it’s got complex financial issues, and it’s got huge political questions that need to be resolved and all of that kind of free rider problems that we know about. And so, my goodness me, we need the best brains as well as the best money to address these issues. Speaker 1 [00:05:27] But I guess in some ways you’re not solving that problem. Jeff isn’t solving that problem. You’re trying to find support, invest in the many folks out there who are developing the ideas and solutions. And I’m curious what kind of mindset you strive to bring to that. You know, I’ve heard the fund described as one that supports ideas and not just projects. That’s got an appeal. Not always easy to invest in ideas on, unfortunately, but it probably takes a different approach than building a company or running a project. Can you give us a bit of insight into what kind of thinking you and your team tries to bring to the challenge? Speaker 2 [00:06:03] Well, we try to identify and monitor the roughly 50 to 70 major transitions that are required this decade and next. You know, the big blocks of we’ve got to totally transform energy. We’ve got to rethink our food system. We’ve got to think about forests. We’ve got to think about our cities. Within each of those, there are five or six transitions, which in and of themselves are pretty major. We’ve got to get. Rid of the internal combustion engine. We’ve got to shift diets towards more plant based. We’ve got to do about 50 things of that level. And what we do is we co-manage with the World Resources Institute and some others something we call the System Change Lab. And what we do with those, we monitor those 50 to 70. And we ask the question, how close are they to tipping points beyond which change becomes irresistible and unstoppable? And what are the barriers to get there? Our job is to be pretty forensic about where we go in using both money and convening power and influence Power. It could be to finance primary research. It could be to finance political advocacy. It depends on the issue, and it depends upon precisely where they are in that trajectory towards a positive tipping point. So when you mentioned we like to address ideas, this is again, is something that Jeff Bezos, you know, will say let’s not allocate funds in our efforts to issues or even to targets. Let’s allocate them to ideas that will get to those targets, that will address those issues. Speaker 1 [00:07:46] And the ethos of the fund, primarily one of technology. That technology can and will solve this. Or do you believe that we also need culture change, behavior change, even social change, and not rely on those magic bullets of technology? Speaker 2 [00:08:02] We absolutely and utterly require cutting edge technology and behavioral change. And indeed, as we move forward towards the end of the 2020s into the 2030s, behavioral change is going to become more important is probable that people in Canada and certainly in the United Kingdom, where I come from originally, we have reduced our greenhouse gases quite a lot. The average citizen has no idea it’s happened because they haven’t had to change their behavior. As we move forward, we are actually going to have to change our behavior. Now, technology is still incredibly important and we couldn’t have a chance of addressing climate change. You know, if you look at the cost of, say, solar energy, I mean, since Jimmy Carter put solar panels on the roof of the White House in 1979, the price of solar has fallen by 99.6%. So there’s actually been a wonderful revolution that’s intellectual and economic. I mean, even ten years ago, the entire economics profession felt that, my goodness me, it would be nice to do something about climate change, but we’re going to have to pay a cost in terms of lost competitiveness, lost economic growth. And now because of cost changes, because of technology changes, because we’ve learned about what policies work. It now turns out that actually smart, strong climate action leads to more economic efficiency. It drives new technologies, it opens new opportunities, it shifts expectations. So there is a much better future. So you get more competitiveness and you can get more growth. Now, we don’t want to be Panglossian about this. It’s not all win win. There are losers. And that’s where politics comes in. Speaker 1 [00:10:00] Well, exactly. This is political and I mean that in a positive way because it’s about collective decision making, which is reflected in in our politics when we do it well. But we don’t do politics very well in many countries. How are you thinking about systems change in the political arena or the collective decision making arena that can perhaps accelerate some of the other investments that you’re making? Speaker 2 [00:10:25] Well, I mean, this is a very difficult issue. We’ve certainly put quite a bit of resources already into communications. Last year, we invested quite a bit here in the United States trying to clarify the narrative about good climate action leads to a good, better economy. And we we invested in targeted messaging through various media, television, social media, basically bringing data, bringing the data and evidence and bringing human stories as to what works. I think generally the environmental movement has been trumped by more sophisticated communications and political skills from the opposition. Speaker 1 [00:11:16] I want to shift to the idea of of of leverage. People will hear that you are investing $1,000,000,000 a year and think that’s a large amount of money. And of course it’s a huge amount of money. But the need out there for the transition is going to be kind of in the 5 to $10 trillion a year range globally. That’s how much capital needs to be invested. So we all need to be thinking more about leverage. And I’m curious what you’re seeing and learning about leverage in your own climate work. Speaker 2 [00:11:45] Well, most philanthropy has been unleveraged, so a dollar into good health gives a dollar of good output. In good health. You know, you build a hospital, you build a school, you build whatever. Unfortunately, because the problems are so great, we need to do better than that. Now, you can leverage in several ways. You can leverage through de-risking private investment. And obviously the Royal Bank of Canada has done incredible work on that. Many investments in sustainable development need some de-risking. One could do that very directly, but one also can, if you like, do the policy side, which is also leverage. I mean, in many ways that’s the most effective leverage of all if one invests in reshaping policy. So what we try and do for every single investment we ask, well, if you like the direct impact and then what’s the second order impact that would encourage others to do it? And another I mean, another form of leverage is simply doing something that is so successful that then through the right kind of communication, it can then become irresistible. So we’re experimenting with all kinds of ways of doing it. So as an example, last year we really wanted to take on the most difficult issue of protection or conservation that exists, which is the Congo Basin, which is, you know, unbelievably precious. It absorbs more carbon than the Amazon Basin and the Southeast Asia tropical forests combined, and yet it’s under massive threat. And obviously there are all kinds of governance issues. So we gave funding to about ten different world class organizations and we said, look, the deal is each of you are very, very good at certain things. Your job is to work on those and be accountable to to us for what you do. But in addition to that, for the first time ever, let’s work as a team together. So if you’ve got the CEOs of ten internationally recognized organizations together with ourselves, then suddenly you get some European governments that say, actually, we’d be like to be part of this. And then you can go and see any head of state in the Congo basin that you want and you start sort of thinking differently about, my goodness me, if we only we could get the the head of the office, the head of the country all the way down and have something joined up, my word, that could be real leverage. Speaker 1 [00:14:20] But that spirit of collaboration is really at the heart of leverage. Leverage isn’t just a financial equation. It’s about bringing together different forces and empowering them, but also using them together to do things that none could do on their own. And it makes me think of the Electric School Bus initiative, which I wanted to ask you about, because that’s a it’s a really neat and ambitious project aimed at decarbonizing the entire U.S. school bus fleet. Curious how you see it as a template for more collaboration, especially between public and philanthropic forces? Speaker 2 [00:14:51] You’re absolutely right what you just said, John. I think I mean, if you look at almost any of the problems that we’re trying to deal with, there’s no one organization. There’s not even one group of organizations. It’s basically a sort of multi-stakeholder solution. And you need governments and you need, you know, NGOs, you need citizen group, corporate sector and so on. And actually the school bus situation in the United States, a very good example of that. There are 480,000 school busses in the United States. If you are a poor child from a poor county going to school in a bus in this country, because remember, schooling is a county level responsibility, you breathe air from diesel fumes. That is basically like being on the street in New Delhi. I mean, it’s really bad for health. So this has a social justice element to it, a health element. And this is one of the very first conversations that I have had with Jeff Bezos and Lauren Sanchez about when I was in my old job. And it was like, wouldn’t it be exciting if we could do something that would have a health benefit? But not only that, it would have a climate benefit, it would have an intergenerational benefit. It would it would actually also help create an industry in this country, because 96% of all the electric busses in the world were built in China. And then on top of that, by the way, during those long, hot summer months while school busses just sit there, they actually don’t sit there if they’re electric because they become a giant battery. And because 480,000 batteries, when you take electricity off the grid, when it’s cheap and plentiful, you put it back on the grid when it’s not, my goodness me, that saves dozens of power plants being built. But you can only then do it if the state level gets engaged, the school districts get engaged, the industrial and financial sector gets engaged. And so what we did, we worked on legislation and now there are, what, $12 billion that’s been put into this, something like that through the new Biden administration. And little by little, you start seeing, my goodness me, we could put this jigsaw puzzle together. Not us. I mean, you said earlier we don’t take any particular credit for this, although I think we’ve played a very good role. We’re part of, if you like, making sure that the pieces of the jigsaw puzzle sort of come together at the right time in the right kind of way. Speaker 1 [00:17:24] This point about multiple benefits from multiple our allies is really critical and often lost on climate policy, where many people, for understandable reasons, see the objective as critical enough on its own to be the only ROI, if you will. That’s important, but that’s not necessarily the case for all sorts of people in society who have multiple needs. And the more that policies and investments can help address those multiple needs rather than be a kind of a single solution oriented one, probably the better we all are. And I’ve been seeing more of this in the biodiversity space, and I raise that because our last episode of 2022 was on biodiversity, and you and I met for the first time at the Montreal Biodiversity Conference and it was there that I got to more deeply appreciate the intersection of climate change and biodiversity and how they both lead to benefits in each realm and are interconnected in all sorts of ways. And I’m curious, Andrew, how you see those two challenges intersecting and how we can do more. Speaker 2 [00:18:28] Well, you’re absolutely right. And by the way, your podcast edition on that was wonderful. I think that conference in Montreal was extremely important and I think combining that with COP26 in Glasgow, which for the first time sort of recognized we can’t solve climate change unless you also protect nature because it’s there’s more than one third of the solution. And the same goes the other way round. You can’t protect nature unless we address climate change, because with the way that climate change is going, we are losing nature at an even more rapid rate. And it’s really been wonderful to see just in the last 18 months culminating in in Montreal, we’ve seen this sort of willingness to think of these two as integrated. And your points about, you know, multiple benefits are incredibly important. You know, they call them co-benefits. And in many parts of the world, you know, if we want to deal with climate change, you know, don’t enter the policy door through the climate change door, enter it through health or entry through nature. Speaker 1 [00:19:32] We’re sort of time, unfortunately. But I also was just reflecting we’re still in the early days of January, and therefore I want to seize on the New Year spirit to ask you, as you look through 2023, what your maybe greatest hope is for the year and also what your greatest fear is. Speaker 2 [00:19:50] Well, look, this is a year where things are going to need to start improving. We got data just today on greenhouse gas emissions in the United States. Greenhouse gas emissions went up last year and things need to change. I am deeply hopeful that actions that may take a year or two to have bite, they are going to start having impact this year. I think some of the decisions made in Glasgow and in Sharm el Sheikh will start to bear fruit in the United States. Obviously with the additional funds that are being put forward. I mean, historically important. We are going to start seeing some progress. But look, we are in a hugely uphill battle. We’re in this paradoxical world where, if you ask two experts say on climate change, you say, how are we doing? And one will say, it’s amazing. You know, costs have come down 99%. We’re doing this. It’s really great. Others who say, you know, we’re a bunch of lemmings going off a cliff the end times and which how could they both be, right? Well, they actually are both right. They are both right. We are doing better and better than we are dog chasing a bus and the dog is going faster and faster. And we are saying we are running so fast is great, but the bus is accelerating away and so the dog can’t keep running faster. The dog has to get its own electric bike. You know, we need a new instrument. And I’ve got a feeling that we’re getting towards the stage where. Will accept that fact. Speaker 1 [00:21:17] What do you think those dogs need to do in 2023, above all else? Speaker 2 [00:21:21] We need once and for all to recognize that no individual government or even government can solve the problem. We need to sit down around the table and we need to get the real decision makers to say, okay, if the issue is electrification of transportation, what do we need to do? How do we how do we have a rational conversation? It can’t simply be preaching. It’s got to be a multi-stakeholder approach. And I hope and pray that we’re heading towards that kind of new it’s really a new governance system. And I think there are signs of hope. But, you know, there’s still a far, far more risks than most people are aware of. Speaker 1 [00:22:08] In a site governance system going to have to come from government or from collectives of government like the U.N., or is it going to come from philanthropists, private actors, business and other coalitions? Speaker 2 [00:22:20] I think it’s already starting to change. I mean, it is quite interesting that if you go to the United Nations General Assembly now, you’ll see a much, much richer approach. You’ll see young people. You see businesspeople. Governments have to accept it. But often governments, you know, don’t always lead. They are responsive. And so the business community, I mean, it’s albeit difficult, it is stunning when you think about it that now $130 trillion of assets under management are now committed to net zero. That would have been unthinkable. Now it’s very, very difficult to implement it. And there’s some rocky things going through right now, but we now need to come through that and say, look, you know, we know it’s difficult, but now let’s really redouble our efforts. And I’ve got a feeling that that’s happening. And, you know, I don’t want to flatter your country, but I do think actually some pretty exciting things going on in Canada right now. Speaker 1 [00:23:20] What excites you most in terms of what’s happening in Canada? Speaker 2 [00:23:22] Well, I think, for example, on the nature side, the announcement that Canada made on massive new protected areas, I think anywhere in history on the first day of the COP and led by First nations, very, very exciting. I mean, talk about multi-stakeholder. I mean, so interesting seeing First Nations seizing and being given authority to manage natural resources, which they are very good at, at managing. That would be just one example. Speaker 1 [00:23:58] It’s those coalitions likely and unlikely that are keeping us moving forward as bumpy as rocky as that road can be. And I’m grateful that the Bezos Earth Fund is leading a lot of those coalitions. Andrew, And that you’re you’re a champion of so many. Thank you so much for being on disruptors. Speaker 2 [00:24:15] Thank you, John. We love listening to your podcasts. Speaker 1 [00:24:19] That was Dr. Andrew Steer, president and CEO of the $10 Billion Bezos Earth Fund. Up next, Ellia haTO will join us to talk about how massive investments in technology are changing the fight against climate change. Speaker 3 [00:24:37] RBC Tech for Nature. Is there a $100 million by 2025 multi-year commitment to accelerate tech based solutions that help preserve the world’s greatest wealth, our natural ecosystem? We work with partners to leverage technology and innovation capabilities to help solve pressing environmental challenges. This program is a key element of how we are delivering on our climate strategy. The RBC Climate Blueprint RBC Tech for Nature is now accepting funding applications until February six. Apply now to partner with us and create a more sustainable future. Visit RBC dot com slash tech furniture for more information. Speaker 1 [00:25:12] Welcome back. Today, we’re talking about how Canada can emulate the most comprehensive climate law in American history, the Inflation Reduction Act, or IRA. Our next guest is Eli Aheto. He’s the managing director of Beyond Net Zero, a global growth equity firm that invests in companies to develop innovative climate solutions. Eli, welcome to Disruptors. Speaker 4 [00:25:34] John Thank you so much for having me. It’s a pleasure to be with you. Speaker 1 [00:25:37] I want to start with Beyond Net Zero, and if you could give our listeners some background on what it is and what it’s all about. Speaker 4 [00:25:44] Sure. Beyond Net Zero is the climate investing team at General Atlantic. I think folks may recognize General Atlantic as a 40 year old global growth equity firm. We’ve been investing in leading businesses in digital sectors for most of our history. And the climate initiative is one that’s fairly new in the last two years. But we recognize it as one of the most consequential opportunities in business today and also one of the most consequential opportunities in society. And so we think that there is a significant need for capital to help drive the growth of businesses that are putting out products and services that help people decarbonize either their operations, their livelihoods. You know, all sorts of activities that need to have reduced greenhouse gas emissions. And so we’re pretty excited about the opportunity ahead of us both, because there’s a real social dimension to what we need to accomplish. But we think it’s a fantastic business opportunity where there are entrepreneurs creating products and services that are saving customers money, which is really exciting, at the same time helping them reduce their greenhouse gas emissions. Speaker 1 [00:26:48] I want to get into some of those examples and opportunities, but wonder first if we can talk a bit about the macro environment. Of course, the Inflation Reduction Act or IRA, is clearly injecting a lot of capital into American opportunities. But at the same time, we’ve got a lot of challenges and headwinds in in markets generally. How are you looking at the macro environment for investing in 2023? Speaker 4 [00:27:14] You know, it continues to be a challenging market as an investor. Obviously, we’ve had markets falling over the last year. In some sectors we still have high valuations, which those two things don’t seem to go together. In the climate sector particularly, we’ve still seen high valuations that haven’t yet reflected where the public markets are. But at the same time, we’re seeing markets that are growing quite dramatically. So if you think about, for example, EV charging infrastructure, that’s a market that Bloomberg thinks will grow 80% year over year, and that’s despite the macro environment. More broadly. If you think about solar, the IEA has just increased its estimate of solar buildout for the next several years by 20% globally. That’s a pretty big step up in one year. Part of that is an adjustment that is a consequence of the IRA. Part of that is an adjustment that’s a consequence of energy security in Europe. And part of that’s a consequence of the decreased cost of renewable power. And so there are a lot of tailwinds that are driving forward the climate opportunity, despite what is still a volatile and in some ways rough macroeconomic environment. Speaker 1 [00:28:22] Well, it has been a pretty rough year that maybe now in the rearview mirror a bit longer than that than a year. And for some that brings back memories of earlier clean tech wrote Wonder in your mind what makes this time different? Speaker 4 [00:28:36] I think there are numerous differences between clean tech 1.0 and where we are today. We have now ecosystems of entrepreneurs, financiers, scientists, academics, policymakers who have experience in climate. We didn’t have that last time around. We have now technologies that very importantly are mature and are cost effective. We have now entrepreneurs focused on business models where they are delivering a cost savings to consumers. We have now financial markets that are ready, willing and able to finance businesses that have demonstrated they can be profitable at scale. And we have obviously a desire for consumers to decarbonize and mandate from corporates to decarbonize their supply chains. We have a political support that we didn’t have in the first clean tech investing boom. And so it’s a it’s a radically different environment. Speaker 1 [00:29:34] Did IRA change your fundamental outlook? Did you wake up in August, September, whenever it hit the headlines and think, Wow, I’ve got to rethink my portfolio and my allocations? Or is it more kind of a marginal benefit than that? Speaker 4 [00:29:47] There’s no describing the IRA as being marginal. It clearly was an overdue substantial statement around what the U.S. was going to commit to relative to climate change, and it created the incentives in several different sectors, some of which were already active. And so I mentioned distributed generation. You know, we’ve been very keenly looking at transportation, electrification. So it will create great tailwinds for those sectors. But those sectors were already moving forward. I think in things like hydrogen and carbon capture, it has changed the game. So anywhere from a 60 to 70% reduction in the levelized cost or the, you know, the cost for those technologies. And so you’re seeing right away companies announcing large scale manufacturing facilities, new hydrogen facilities. You’re seeing people announce new battery facilities, you’re seeing folks announce new lithium mining operations. And so I think the IRA has very successfully catalyzed those harder to abate longer duration and somewhat less mature technologies to make them economic and help them scale. The IRA was a game changer in a lot of ways. Now for our portfolio, I don’t think it changed what we’re doing. Mostly we are focused on mature technologies, businesses that are scaling, and so these were businesses that were successful pre IRA, but there definitively is a wind at their back with the IRA. Speaker 1 [00:31:16] But as you look at options, as all investors are doing and will continue to do, what do you see as the needs for Canada to become a greater pull for investors like you? Speaker 4 [00:31:28] The key for us is is business models with scale. And so obviously relative to the US, Canada has a smaller population and a smaller economy by the numbers, but it’s still a very large country and the very clear regulatory frameworks and there are a fairly sizable and very attractive sort of income levels in Canada. So we would expect that those things will yield. Businesses that are serving customers decarbonize in attractive way. You could see easily businesses that are focused on electrification of automobiles being relevant in Canada. You could see easily businesses that are financing consumers to decarbonize, being relevant in Canada. And so I don’t I don’t think that there is any business that exists in the US that couldn’t exist in Canada. It’s just a question for us to go out and find those entrepreneurs and figure out how to convince them to partner with us. Speaker 1 [00:32:20] And that’s a great message for entrepreneurs who may be listening that the world of capital is watching and ready to move and move very quickly in in this environment. Ali, as we move towards close, I wonder if you can give us a perspective on General Atlantic for our listeners who may not be familiar with it. It is one of the great names in investing and has been for decades. What excites you most About 2023? Speaker 4 [00:32:46] I wouldn’t have guessed that we would have the tailwinds we have today. It’s the IRA is a big tailwind. Unfortunately, energy security as a as a concept is a big tailwind. The cost of these technologies keeps coming down. And every day I meet an entrepreneur who is, I think, cracking the code around how to bring decarbonization to markets in a way that’s attractive for the customer and for the investor. It is a sea change from what climate 1.0 was. But when you see that it’s possible to both bring your customer value, your investor value and society value, that that I think is a really attractive proposition. Speaker 1 [00:33:29] That’s a great message to wrap up with Ali and a great message to begin the year with that there’s a lot of people out there cracking the code. Thank you for being on disruptors. Speaker 4 [00:33:39] It was my great pleasure. Thank you so much for having us. Speaker 1 [00:33:42] That was Eli Aheto, managing director at Beyond Net Zero. And before that, Dr. Andrew Steer, president and CEO of the Bezos Earth Fund. We’re at a critical juncture as a country with so much money being put into the advancement of renewable energy and electric vehicles, Canada is bound to feel the effects. It’s up to all of us not to sit back and watch from the sidelines, but rather take bold action, show courage and in the global race to net zero, even take the lead, it’s Canada’s opportunity. Join us next time for a special live on location episode from Davos, Switzerland. I’ll be there along with business and political leaders from across the globe for the World Economic Forum. And you can bet the climate crisis will be one of the hot topics. Until then. I’m John Stackhouse and this is Disruptors, an RBC podcast. Talk to you soon. Speaker 3 [00:34:39] Disruptors, an RBC podcast is created by the RBC Thought Leadership Group and does not constitute a recommendation for any organization, product or service. It’s produced and recorded by JAR Audio. For more disruptors content, like or subscribe wherever you get your podcasts and visit our RBC.com slash disruptors.

Speaker 1 [00:00:01] Hi. Is John here. I’ve been in Montreal this week talking and learning a lot about biodiversity and how we can protect far more of nature than we ever have. It’s going to take billions of dollars and new technologies to fundamentally change our relationship with nature. This was at the forefront of the United Nations Convention on Biological Diversity in Montreal, also known as COP15, which is wrapping up as we speak. You may have heard about COP27. That was the one that took place in Egypt last month. It was focused on climate, but the world is also convening to talk about biodiversity, not just nature, but the diversity of nature and how all of us depend on it. And this year’s conference comes at a critical time with the world’s biodiversity crisis more urgent than ever. In 2011, just a decade ago, 20 targets were set at the Convention on Biological Diversity. And a study done nine years later showed that by 2020, the world had failed to achieve a single one. This is not an opportunity we can afford to waste again. In Montreal, cop fifteens main focus was to have every country involved sign on to the post 2020 Global Biodiversity Framework. Both a global and Canadian goal is to protect 30% of land and sea environments by 2030. That won’t be easy. Where do we even start? Here in Canada, where our country stretches over 15 million square kilometers. It’s going to take a lot of finance and a lot of technology and a lot of data because what gets measured gets managed. But perhaps Canada can show the world how we can change and enhance our relationship with nature. Where will those new models come from? Where will the disruption come from? That’s what we’re going to explore today. This is Disruptors. An RBC podcast. I’m your host, John Stackhouse. Today on the show, we’re talking about biodiversity, what it is, and how to protect it, using the power of finance and economics. It’s a topic that is near and dear to one of Canada’s most prominent environmental groups. Speaker 2 [00:02:16] I am Catherine Grenier, president, CEO of the Nature Conservancy of Canada. Often referred to as NCC or the largest non-governmental private land conservation organization in Canada. We take action at a large scale and we deliver permanent conservation across the landscape, from coast to coast to coast. One place for us right now where we’re investing lots of time and effort is on the data side through technology, using technology not only to identify where and how we work, but also measuring the impact of the work that we do. So beyond actor, right, being able to measure quality of habitat, species, quality of water, because those are all metrics that ultimately we could turn and monetize as a service. Because right now, carbon is really the one data that everybody could understand. There’s a market for it. It’s great, but carbon alone won’t get us all the access to private capital we need in order to accelerate conservation. Speaker 1 [00:03:13] They’re doing important work and RBC is proud to partner with the NCC as part of our Tech for Nature program. That’s a $100 million, multi-year commitment to preserving the world’s greatest wealth, our natural ecosystem. Since 2019, more than 550 organizations have benefited. Another group were inspired to work with is Wildlife Conservation Society Canada. It’s a Toronto based charitable organization that uses science based data to save wildlife and wild places. Dr. Justin Ouray is the group’s president and senior scientist and our first guest on today’s episode. Justina, welcome to Disruptors. Speaker 3 [00:03:49] Thank you so much for inviting me. Speaker 1 [00:03:51] I want to start with the term biodiversity. How do you describe it? Speaker 3 [00:03:56] Really, in a nutshell, it’s life on earth. It’s the variety of life on earth. And the diversity part of biodiversity acknowledges that we need a variety that sustains life on earth, which includes us. So it’s composed of species, ecosystems, but also genetic variety within species. So those are sort of the broad components, but there’s so much life underneath that. Speaker 1 [00:04:18] One of the issues I wrestle with is how the pandemic made us arguably more tech dependent. Locked away in zoom land and perhaps more isolated from each other. I’m curious, as you reflect on the last couple of years, what you’ve learned about ourselves as a species and our relationship with nature that can be applied to biodiversity? Speaker 3 [00:04:38] Well, one thing that was incredible at the beginning when everybody stopped moving, quite a lot of animals who were quite constrained in their movements by either noise or traffic or just the everyday. But hustle and bustle of people sort of came out from the shadows at weird times of the day. And there were all sorts of stories about large animals walking down the streets or birds singing in ways that people hadn’t heard before. You know, there were so many stories about that. And that unfortunately lasted just a pretty short time, relatively speaking. But it did for us biologists to study animals that provided a really good window into seeing just sort of how animals are constrained by us. And then when they’re not that they can sort of recover behaviorally, at least it did not change any of the trajectories that we’ve been seeing fundamentally, because those would take years of recovery to do. But a lot of people who felt so penned in themselves found that one of the only things they could do was go out in nature. Speaker 1 [00:05:38] It’s interesting to reflect back on those existential moments, and a lot of people were asking this question Maybe we should be looking at this as an opportunity to reorient ourselves as a as a collective or even as as a species. Some saw that as a throwback to a more kind of naturalist era references to Walden Pond and the like. Yes, all the evidences were kind of reverting to the norm pretty quickly. Why do you think that is? Speaker 3 [00:06:01] This is not the first time that’s happened. We’ve had lots of moments where, for example, during recessions you see a lot of the conversation in the media and so forth going into that reflection mode that maybe, you know, we’ve done too much of this for a while and we should we should re-orient ourselves or hang back. And then in all times we come back even more fiercely. And it is a huge disappointment, to be quite honest. And, you know, I. I don’t have a great explanation for that, except that we have to keep trying. I do think that each time it happens, we have more pause than before and more people are converted and more people are talking about it. So even though it’s not enough change, there is change that is happening. I’m quite sure of that. Speaker 1 [00:06:42] In a report out of the UK known as the Dasgupta Review, looking at the economics of biodiversity. It showed how much we are depleting nature even over the past generation from 1992 to 2014. So not a long span of time in the grand scheme of things. The world both doubled what we produce per capita. So that’s arguably good, lifted a lot of people out of poverty, but we lost 40% of our natural capital per person. That’s the cost of in some ways of that growth. It’s extraordinary. The report said this really jumped out at me, that we literally need another planet to accommodate the growth on the trajectory that we’re on. When you pause and reflect, what stands out most to you. Speaker 3 [00:07:24] Well, that particular report, what stands out to me is when economists get on the bandwagon and see it because it’s, you know, difficult for somebody like me who’s trained as a biologist to talk in economic terms because worth is different for me. But when I read the Dasgupta report and he and his colleagues explained, you know, how the term GDP needs to change to bring in and bake in much more consideration of depreciation of natural assets. It was a very powerful set of statements. But going back to also what you said and you know, scientists have been ringing bells for years and years and they are getting more and more bold in doing so. And there has been report after report after report that show that, you know, we have widespread species declines, we have huge ecosystem degradation and widespread systematic conversion of productive areas. These trends that you see are not as a parent, as climate like climate can express itself in drastic events that we all see play out. But biodiversity decline is much more of a hidden crisis, and it’s a slow moving one. It’s something that won’t be perceptively different from one day to the next. But when measured in, you know, years and decades, it’s out there. We think we might be satisfied with seeing trees. But actually what is occurring out in suburban areas where even though we have parks, is that these are becoming more homogenized. It’s the same species that are taking over and appearing. And diversity of life is declining. Speaker 1 [00:08:54] It’s really interesting the way you lay it out. And it gets me thinking we have come to value diversity in all sorts of walks of life and we’ve even attached an economic quotient to it and are able to measure organizations, businesses that perform better with more diversity. There’s almost no argument about that now, but we haven’t found a way to attach the same value to diversity in nature as not just diversity for its own sake, which may be sufficient, but also that asset value, that nature is a more robust, resilient, stronger economic asset as well as natural asset with that diversity. There’s been great advances in the economics of climate and through instruments like carbon pricing, which is a financial tool that sees climate as an asset, that you need to attach a value to measure literally price. And then that leads to all sorts of economic behaviors. I wonder if there’s the same opportunity for biodiversity. Speaker 3 [00:09:51] As a segue way to answering your question, I want to go back to an earlier point you made about how people don’t appreciate the diversity. And I think a lot of it is because biodiversity is so complex as a as an entity and you know, it species, ecosystems and genetic diversity as well. They’re not that many people who can go out and tell, you know, the variety of birds and grasses and grasshoppers. It’s amazing that when people do start to learn how to identify life and get introduced to it, the appreciation is unbelievable, right? So then you can imagine the reverse where people really don’t appreciate the diversity in how they see a tree as a tree is a tree. Right. The Segway then to your other question, is very important there because you have to measure the value in order to have it enter into, you know, instruments like that. And, you know, a credit, for example, a biodiversity credit is a thing in the sense that it’s a concept that, you know, people are talking about and thinking about. But its efficacy is all dependent on whether or not you’re able to measure that currency and then you can use it for something to offset damage. And it’s the same principle as climate. But measuring and monitoring is incredibly complex, and it also relies on restoration. And we’re not that great at restoration yet. We can restore a pond and we can restore an area to sort of grow back green. But bringing back the diversity that was there before, not only is that very difficult, if not impossible to do in many cases, but we won’t know success for many, many years. And so all those elements make it extremely difficult to bring that kind of market based instrument into the biodiversity realm. But people are trying. And the good news is that whereas many companies, when you looked at their ESG records and so forth, environment only equaled climate. Now, increasingly, there are efforts to bring biodiversity into that, but we have a long way to go until that actually becomes something that is actually going to be effective. I mean, all those stats that you said at the beginning about how we need another planet. Planet is because we have unbridled consumption and with that comes unbridled production. And these instruments will not help with that problem. Speaker 1 [00:12:05] Is it possible to maintain progress as we know it and protect biodiversity? Speaker 3 [00:12:10] Right now, our progress is very compromised by what we’re doing for the planet. So no matter what, if you say growth is one thing, but progress is something else which includes quality of life and so on. And there’s a lot of people on the planet who are suffering their quality of life, are suffering because of what we’re doing to the planet. So I would say that we’re not going to be able to make progress under business as usual anyway. So rethinking our relationship with nature and how we want to use it and value it would probably go a long way in maybe a different kind of progress, but certainly because of our relationship with nature and because we understand so well the tie between the state of nature and human well-being, that we have no choice but to do something different than we are right now. Speaker 1 [00:12:59] I want to go back to a point you were, I think, touching on earlier, which is essentially homogeneity versus heterogeneity in nature and whether we are undervaluing diversity. And I think of the example of trees. So there are ambitions, let’s say, in Canada to plant 2 billion trees. No one talks about which trees exactly the diversity of trees is a better time of 2 billion trees, or would it be better to have 500 million with more diversity? Those sorts of calculations don’t really get made, and maybe they shouldn’t. Maybe we just need to focus first on quantity and then get to quality. Is it okay to kind of push ahead with these bold quantitative ambitions without reflecting on the quality or such as diversity? Or do we need to step back and assess quality first? Speaker 3 [00:13:48] In terms of sequence, I don’t know, but I think quantities absolutely have to come with quality. And luckily the push that you’re talking about generally, that is where the conversation goes. I mean, an analogous one is is protecting 30% of lands and waters. It matters which ones you protect. And that is absolutely the plan is, is that you you need to have that protection happen in areas that are important for biodiversity, areas that are connecting nature, areas that are if effectively managed and so on and so forth. And then lastly, the restoration is only going to get you so far. There lots of ecosystems, for example, peatlands that naturally have store enormous amounts of carbon that you do not want to interrupt as you’re pursuing development goals, because that can exacerbate the climate crisis worse than you had it to begin with. So those are all the kind of things that you have to think about when you’re considering, you know, these so-called solutions that are nature based. Speaker 1 [00:14:43] All of this is going to cost money. I think the Dasgupta review put the gap at $700 billion globally. It’s a big, big gap, as you know. I think it’s like it’s huge. Speaker 3 [00:14:53] Yeah. Speaker 1 [00:14:54] Of all the capital invested last year in climate related activities, I think it’s something like only 2% went into what could be categorized as conservation. 2%? Speaker 3 [00:15:05] Absolutely. Speaker 1 [00:15:05] How do you change that ratio or that equation? Speaker 3 [00:15:07] So I’ll look to you know, that’s a really tough question. And again, I do think that the entire ecosystem of financial investment needs to be looked at. It wants to see if some things can be diverted, especially things that are harmful, where financial investments actually make the problem worse. So, for example, building roads into areas that will then induce growth or making it easier for companies to follow certain pathways that the public purse would pay for and so on. So if those are undermining some of the biodiversity goals, then you might want to want to rethink those at the same time. So Indigenous led conservation in this country has become hugely important and increasing. So and there is enormous value in the stewardship, monitoring, protection that communities confer on these homelands, many of which are the most intact areas on the planet. So you can see, look at that track record and say, well, that’s got to have some value. And to many people, it’s starting to. Speaker 1 [00:16:05] I’m so glad you raised that, because what we’re seeing in all sorts of indigenous communities around Canada is what I might call conservation 3.0, conservation 1.0, being that kind of centuries old ring fencing of nature, going back to the tragedy of the commons where people decided, Boy, we better literally build fences around nature to protect it. 2.0 Starting to find financing for it, charging people admission to see nature or engage with nature, national parks and the like. But 3.0 is really leveraging nature as an asset, but stewarding it as an asset. Any asset owner knows that you’ve got to invest in the asset, you’ve got to protect it. You don’t deplete it. That’s bad ownership. It’s bad stewardship. And maybe we shouldn’t be surprised that it’s indigenous communities that are bringing us to 3.0, although maybe that was the original 1.0 and I’ve mixed messed up the sequencing. But how realistic is it to assume that those 3.0 approaches, as I’m describing them, will be sort of. Efficient to close that enormous gap that we were just speaking to. Speaker 3 [00:17:07] I can’t speak about realism because it’s just it’s too important to be pragmatic or too pragmatic. But I think the progress that we’ve made in the last number of years is significant. And the Prime Minister announced an investment of $850 million over seven years for enormous Indigenous led projects that also have private capital coming in. This is something to watch out for this kind of model and something that we would not necessarily have predicted even a year ago. So there’s been enormous progress and rethinking and reimagining how this is going to happen. I think there’s a lot of understanding that business as usual cannot keep that way. So if you have that understanding and you can let go of business as usual, then it is possible to imagine this. And the last point is that it again, it has to come with a package. I mean, we as human beings have an enormous amount of production and consumption, and that has a big bearing on where we find ourselves today. And so holding back on some of that at the same time as investing in the right things that have different kinds of value are probably a part of the recipe for success. Speaker 1 [00:18:16] Just as we move towards clothes. I wonder what you think. We need to keep really front of mind as we come out of the Montreal conference and look to the challenges as well as opportunities of the next few years. Speaker 3 [00:18:31] So all the nations of the world that have signed on to the Convention on Biological Diversity, which is most of them have been gathered here in Montreal. There’s been a ton of attention on this and the matter of biodiversity. And in the process, there’s also been increasing appreciation, even by members of the public, that the climate and biodiversity crises are interlinked and then must be resolved together. So I think the best case scenarios is for people to understand we have no choice but to really resolve it and not continue on with business as usual. Speaker 1 [00:19:01] That’s a great message that this is really on all of us. Our guest today has been Dr. Justina Ray from Wildlife Conservation Society Canada. Justina, thanks so much for being a part of disruptors. Speaker 3 [00:19:12] Thank you so much for inviting me. Speaker 2 [00:19:18] RBC Tech for Nature is our $100 million by 2025 multiyear commitment to accelerate tech based solutions that help preserve the world’s greatest wealth, our natural ecosystem. We work with partners to leverage technology and innovation capabilities to help solve pressing environmental challenges. This program is a key element of how we are delivering on our climate strategy. The RBC Climate Blueprint RBC Tech for Nature is now accepting funding applications until February six. Apply now to partner with us and create a more sustainable future. Visit RBC dot com slash tech furniture for more information. Speaker 1 [00:19:53] Welcome back. WTF. Where’s the finance? That was a hot topic of debate at the big UN climate conference in Egypt and it was on the table again at Montreal in the talks over biodiversity. We’re talking today about biodiversity, but also about the financing and technology needed to conserve it. Our next guest is here to address that. Hadley Archer is executive director of Nature United. Welcome to Disruptors. Yeah, thanks, John. As we think about ways for the private sector, for investors, be they individuals or firms or funds, we all know of revenue streams that exist from nature be as simple as campsite permits. But we’re also seeing more sophisticated tools, offsets and inserts, for instance, or green bonds. I’m curious how you’re thinking about that revenue and financial opportunity as a way of attracting more private capital to invest in nature, be it fields, farmlands or forests or oceans. Nature is the greatest asset. Natural capital provides everything that humanity needs in the food we eat, the air we breathe, the water we drink, and indeed runs our economy. So absolutely right that we have to value nature. And if we do so properly, there can be incredible investment opportunities. The challenges, of course, are that we’re not properly valuing nature. Carbon is trading that 15 or $20 a tonne in forests, and some recent studies have placed a value closer to $600 a tonne. If you think about that, the carbon sink value that forests provide globally. So that’s the first thing is to get the values right and to really understand the benefits that whether it’s carbon sequestration or pollination for food or water filtration. The second issue is timelines, right? So if we think about investments all too often we think about short term paybacks and short term horizons. But if we really value what nature can provide us and continue to provide, we have to think about longer time horizons and see these as longer term investments. Indeed, indigenous communities look at seven generations, not the next quarter necessarily. So that’s another important piece that we have to get right and we have to address the underlying. On that note, issue of rights and title. So lots of things to work through. But indeed, when we do, we can see that there are very significant investment opportunities that emerge in the Great Bear rainforest where the last 15 years more than 5 million acres of temperate rainforest have been protected. A big part of that was protecting old growth forests that store tremendous amounts of carbon that has created an opportunity for credible, high quality carbon offsets, which create an opportunity for companies who want to purchase offsets to help address part of their climate footprint and in doing so, provide critical new revenue streams to indigenous communities and land managers on the ground to steward these places. Yeah, I’m so glad you mentioned the Great Bear Rainforest because it is a great Canadian success story. The forest would probably be given the Order of Canada if that were allowed. Yeah. I mean, it is such a great example, John, and in fact a global example of how we can protect and sustainably manage an incredible ecosystem that still supports viable coastal economies and resource sectors, but at the same time recognizes the value and the importance of these critical ecosystems and puts, in the case of great bear indigenous peoples at the at the center of that. It’s exactly what we need to do is learn from these successes where we’ve found solutions that work for not just the environment and the people living there, but also for the economy. It’s exactly how we’re thinking about agriculture, for example, is how do we support farmers to continue what they’re doing and to farm responsibly, but to accelerate the pace of adoption of some of these approaches to farming that we know the evidence shows that can benefit climate change, can benefit the environment, restore soil health, do that in a way that provides economic incentives for farmers to adopt those. And they help us understand the growing role of technology in biodiversity. Yeah, it’s incredibly important, John, because for a bunch of reasons. One obvious reason is just especially in a country like Canada, to be able to sort of assess the landscape and understand the state of nature and state of our forests, for example, or the, you know, the state of our natural ecosystems. And so satellite technology has been a game changer in that regard. So we can really understand with very impressive precision, what is the state of play with? One thing to say, we have to, but the real value on ecosystem services. But many of these are very hard to measure. Take soil carbon, for example. It’s very complicated. It varies across the landscape. Technology is going to be critical to being able to quantify value and validate and then in many cases figure out how we can use that to generate new revenue streams. And I hope we can do this again in a year’s time and measure the progress that we’ve made. Thank you for being on this episode of Disruptors. Thanks, John. It’s been a real pleasure. Look forward to being back. Near. Our guests today were Dr. Justina Ray from Wildlife Conservation Society Canada and Hadley Archer from Nature United. Thanks also to Catherine Grenier from the Nature Conservancy of Canada. For more on my takeaways from COP15, you can go to our BBC.com. Thought Leadership. That’s a wrap for disruptors for 2020 to join us early in the new year when we’ll take a look at the US Inflation Reduction Act and what 2023 may hold for our country’s clean tech sector. From all of us to disruptors, we wish you a safe and happy holiday. Thanks so much for listening this past year. And join us again in 2023. I’m John Stackhouse, and this is Disruptors, an RBC podcast. Talk to you soon. Speaker 2 [00:25:40] Disruptors, an RBC podcast is created by the RBC Thought Leadership Group and does not constitute a recommendation for any organization, product or service. It’s produced and recorded by JAR Audio. For more disruptors content, like or subscribe wherever you get your podcasts and visit RBC dot com, slash disruptors.

Speaker 1 [00:00:01] Hi, it’s John here on this show. We’ll be talking about artificial intelligence or AI. But first, I want you to meet someone. Or should I say something? Hi. It’s an AI version of John here. It’s remarkable how much I sound like the real thing. Another remarkable thing I can do is write podcast episode titles. For example, our friends at the University of Toronto were kind enough to feed the interview you are about to hear through GPT three. Hi, it’s the real John again. GPT three stands for Generative Pre-Trained Transformer and it was created by Open AI, an organization founded in San Francisco in 2015 by Elon Musk and Y Combinator. Sam Altman. Elias Suzuki over there. Chief Scientist is Canadian. He’s a U of T alumna. He’s also a former grad student of A.I. pioneer Geoffrey Hinton, who we’ll hear about a few times in this episode. GPT three uses deep learning to produce text that read like it was written by a human and their daily to app is making headlines for its ability to turn text descriptions into hyper realistic images. We wanted to test this tech marvel, so we took the interview that you’re about to hear and gave it to GPT three and came up with a clever title. AI. We weren’t as prepared as we thought. No kidding. Hi, it’s me again. A.I. John. A.I. has proven itself capable of many things, like reading and delivering a podcast, introduction and writing great titles. But has it proven to be the game changer many thought and promised it would be? I would say no, or at least not yet. Thanks for that Amy. GPT three also generated concise summaries of the interview you’re about to hear. One in particular reads A.I. is not going to figure out the complexities of health care. It’s a matter of time for organizations to experiment with A.I. to figure out how best to use it. A.I. is a prediction tool to help organizations optimize against an objective function. But you decide. See if you agree with GPT. Three Thoughts on the topic. This is Disruptors, an RBC podcast. I’m your host, John Stackhouse. Today’s guest is one of the many people who sees the potential but knows we still have a long way to go. AJ Agarwal is a professor at the University of Toronto’s Rotman School of Management, a global center of research and teaching excellence at the heart of Canada’s commercial capital. AJ was named to the Order of Canada this year for his contributions to enhance Canada’s productivity, competitiveness and prosperity through innovation and entrepreneurship. Looking back, AJ admits that when he wrote his 2018 bestseller Prediction Machines, he overestimated how quickly A.I. led changes would come. This was the impetus for power and prediction. His latest book that looks at the economics of the systems in which technology operates. AJ may also be a familiar voice to our listeners as he was a guest on our special two part series called The Creativity Economy, which we produced last year. We recently got back together to talk about how Canada can stay at the forefront of air developments and how businesses of all sizes can stay ahead of the curve. Here’s our conversation. AJ, Welcome to Disruptors. Speaker 2 [00:03:29] Thanks very much, John. Happy to be here. Speaker 1 [00:03:31] You’re the founder of the Creative Destruction Lab. For those listeners who may not be familiar with Kdl, can you give us a quick sense of what it is and what motivated you to launch it? Speaker 2 [00:03:41] Sure. So Creative Destruction Lab is a not for profit program found at the University of Toronto at Rotman School. And the mission is to enhance the commercialization of science for the betterment of humankind. So my Ph.D. dissertation was on the economics of commercializing early stage science, and I spent a few years at MIT, and my first faculty job was at Queen’s. So I moved back to Canada. This had become a topical issue in Ottawa that Canada was doing a good job on the science side, but not a great job at commercializing the science given my topic area. I started getting invited to various policy meetings and white papers and roundtables and so on, and I thought that was great. And after about ten years of doing that, I realized, Wait a minute, I’ve been doing this for ten years, and everyone’s still talking about exactly the same thing as when I first arrived in Ontario. And so that point, I decided I was never going to do another roundtable or breakfast meeting. I wanted to focus on actually doing something. And so when we launched Creative Destruction Lab, it was very small. There were 25 companies that came into the program today. There’s this year we took in 650 startups around the world, but when we started, it was 25 companies. And the idea was that there was a missing market for what we call judgment. Judgment is simply when an entrepreneur wakes up in the morning, they have a thousand things they could be doing and they think they don’t have the bandwidth, do all those thousand things. And so let’s say they can do three things. How do they pick from the list? Thus, judgment. You can’t go down to Bay Street and buy five units of judgment. It’s not for sale. And so that’s what in economics we call a market failure, where there’s willing buyers and willing sellers, but somehow there’s a friction that prevents the market from clearing. And so Creative Destruction Lab was designed to address that market failure that we bring together the inventors who need the judgment and the people who have the judgment. Speaker 1 [00:05:31] Is that a natural extension from that into AI, which Sidel has become fairly well-known for, and what will get into more deeply in this conversation? Speaker 2 [00:05:40] Yeah, so that was our first introduction to the modern incarnation of AI, which is through machine learning, is that some graduate students of Jeff Hinton, who’s a well-known professor, pioneer in deep learning. They came in 2012 into the first year of Creative Destruction Lab, and they introduced us to this new technique. In the beginning, we didn’t fully appreciate it, but they came to Creative Destruction Lab as a way to help them turn their scientific innovation into a business. In fact, the first one was a student named API Fitz, and he had come up with a way of using this new technique, using A.I. to predict which molecule would most effectively bind with which protein. And created a company called Atom Wise. So he brought that into Creative Destruction Lab and in the process introduced us to what would become a revolution in artificial intelligence. Speaker 1 [00:06:29] I suppose there are. Just ask for your definition of A.I. artificial intelligence. Speaker 2 [00:06:35] Sure. In terms of the characterization, this was the definition that we had in our first book, from an economics perspective, is we characterize a rise in A.I. as a drop in the cost of prediction. And so effectively, it’s the technology that makes prediction cheap. In economics, we do that with all technology. So we strip away the technical parts of a technology. And in economics we always ask the same question about every technology is what does this reduce the cost of? So semiconductors reduces the cost of arithmetic makes a metric cheap Internet reduces the cost of search costs, digital distribution of goods and services and AI reduces the cost of prediction over the. Speaker 1 [00:07:21] Past ten years, there have been incredible advances in A.I., but it’s also not played out in the ways that many of us thought it might. AJ What over the last five years of AI’s development has surprised you most. Speaker 2 [00:07:37] On the negative side? I would have thought that it would be far more prevalent, but it hasn’t transformed the world the way that we thought we would be further along in that transformation. When we wrote that book in 2018, on the positive side, there are some things like, for example, the large language models, Darley and and the various other permutations where you can type in a sentence describing a scene and it creates the picture and GPT three where you type in a prompt and it writes a paragraph or a page or multiple pages and it’s like autofill, except it’s rather than just filling in the rest of the sentence, it fills in the rest of the story. And so those things are, I would say, better than what I would had expected by this time. But from an impact on the economy perspective, it’s been significantly less than we expect and that’s really motivated the second book. Speaker 1 [00:08:32] You have some really startling statistics in the book. One is that only 11% of corporations that are invested in AI have achieved success in scaling AI applications only 11%. These are big companies with lots of really smart people and capital and data to work with, and most of them are failing. Why is that? Speaker 2 [00:08:54] Yes, that’s really the motivating question. The puzzle in the book is what happened as we poked and prodded and met with lots of people in industry who are working with AI. We came to the conclusion that we had severely underestimated the importance of all the other parts of the system that need to change above and beyond the actual prediction tool created by the AI. And in my view, this is really the key insight here from the book. We make this example comparison to electricity and how electricity took so long to take off. And the original value proposition for electricity was this was will save energy. And so let’s say you have a factory. It didn’t make any economic sense to tear out your existing infrastructure and replace it with distributed electricity. But as new factories came online and some people were willing to experiment with this new electricity, they started to discover benefits from the electricity above and beyond fuel savings. So, for example, in order to actually transmit the power to the machines in the factory, it would come into the building via a big steel shaft that would turn and power machine. And that thing was very heavy. And so it required a lot of bracing and quite a significant structural requirements to the building. As soon as you remove that. Buildings could be constructed much lighter. And so it just lowered the capital costs of building a factory. Secondly, because they wanted to keep those heavy shafts as short as possible, they would put all the machines as close as they could to the wall and they would build vertically. Once you remove that constraint, they realized it could make single storey buildings again, much cheaper for construction. And then perhaps the biggest advantage they discovered is that before they would power everything off a single shaft so that when one machine went down, the entire factory came to a halt. With this new distributor, electricity, each machine had its own power source. And so when one machine went down, the others could keep operating. And that made the whole thing a lot more productive. And so when you start adding up all those benefits, it became much greater than the energy savings. And so what they realized was the key benefit was not so much energy saving, which was the original value proposition, but instead it was decoupling the machine from the power source. But that was the real value proposition. Speaker 1 [00:11:24] So the challenge really is the organization. It’s the systems, it’s not the task. And one of the other examples I’ve been reflecting on a lot from your book is IBM Watson. Does everyone remember IBM Watson It was kind of supposed to change everything just because it won Jeopardy. But there was a sense that health care particularly would be where IBM Watson would make the most profound change, as we all know, the inefficiencies of health care. Wouldn’t it be great if AI rooted and driven technologies could get us better? Health care for less money really happened because of the complexities, the systems of health care. Is that a forever thing with a complex system like health care, or is that just a matter of time for AI to figure out the complexities? Speaker 2 [00:12:11] Well, A.I. is definitely going to pick out those complexities, in other words. So, John, about three weeks ago, my coauthors, Avi Goldfarb, Joshua Gans, as well as one of our colleagues at MIT named Kathryn Tucker. The four of us organized a conference in Toronto. Some of the top economists in the world focused on AI. And the second day, Watson focused entirely on A.I. and health. Since you raised the issue of health and if I were to characterize that day, I would say it was a mix of both elation and depression. The elation was all the experiments that people were reporting in of eyes that were performing really miraculously in health care applications. So superhuman, better than doctors in all kinds of, for example, diagnostic capabilities, being able to read medical images, pathology slides and eyes that are better able to predict mental health crises, attempted suicides than mental health experts, you know, all kinds of things that would make health care cheaper, faster and more accessible, especially to lower income environments. So that’s on the positive side. On the negative side, the reason it was depressing was because so few of these things have been demonstrated in any kind of application setting outside of the research labs because there are so many barriers to deploying them, these system frictions that they are not aligned with the incentives of hospitals or the fixes are not aligned with the incentives of doctors, of insurers. There’s all kinds of frictions that basically require an entire system level overhaul. And these people who have been working in this area, you know, see the benefits. They’ve measured how effective they can be. And yet they’re seeing them being dismissed in terms of application. And so, you know, the question is, what’s it going to take for a system overhaul? People were asking, what maybe, maybe in some other countries, maybe in lower income countries where there’s less regulatory barriers and people can try things more easily? We don’t know. Speaker 1 [00:14:09] You also make the point in the book that AI’s success often requires experimentation. That’s probably true for all technologies, but especially for data based technologies and software. That’s harder to do in business and harder to do in business. That involves people even harder to do in a regulated business where human safety or privacy or other legitimate concerns are at play. Do we just have to give this more time than we may have thought five years ago? Or are there greater challenges then than time? Speaker 2 [00:14:40] Well, certainly time is one. And also a disposition and willingness to experiment. I think a number of things need to come together in terms of leadership, whether it’s of a hospital or a health system and the capital and the willingness to experiment. And I suspect there’ll be some kind of catalyzing event where somewhere in one of the OECD countries, somebody will really push the boundaries, then they’ll demonstrate the benefits, and then others will follow. Speaker 1 [00:15:11] If I’m running an organization, big or small, in any sector, if I’m listening to this and thinking about how this might affect whatever it is I do, how can I move faster without having to wait for that catalytic event or a crisis? Speaker 2 [00:15:26] I think, you know, creating a an environment with a very purposeful process for running experiments. I think in most corporations there is not a culture of experiments, experiments with a purpose. In other words, we’re running this experiment to test this particular hypothesis. Once we learn the outcome of that, that reduces the risk for scaling it to this next step and then this next step. So in other words, there is a North Star that we are pursuing. Let me give you an example. Imagine going to the doctor and you go for a checkup and the doctor does their annual checkup and then says, you know, I think you’re going to get really sick in about three years. So, you know, thank you for coming in and we’ll see you next checkup. He would say, wait, wait, wait a minute. What do you mean? I’m going to get sick in three years? Aren’t you going to tell me what’s the matter with me? And aren’t you going to give me some kind of treatment plan? And imagine, Doctor said no, but you would think that’s crazy. It doesn’t make any sense. But that’s what the insurance industry does all the time. Let’s say you and I both want health insurance and let’s say my premiums are 25% more than yours. That’s because the the insurance company has made some prediction that I’m more likely to file a claim than you. And their capabilities today are so much greater than they were before. Now they’re able to make predictions down at the sub peril level. So in other words, like the likelihood that you’re going to have a leaky pipe that would cause a basement flood or an electrical fire, that they’re down at that level of precision in their predictive capability. And given that they’ve got that kind of predictive capability, they could figure out whether it’s worth it for, let’s say, you or me to buy a $500 device to do early detection of a leaky pipe or a device that you can plug in to your wall that gives you early detection of electrical fire. So those devices exist. You and I might see them advertised on late night TV, and we don’t know whether it’s worth it for us to buy that. But they know, Hey, I know what the risk is. I’m pricing your risk. John It wouldn’t be worth it for you to pay the $500, but. AJ It would be worth it for you because you’re at a higher risk for that kind of a of a peril. So they have that kind of information. And yet for the most part, the insurance industry does not do risk mitigation. And part of that is that the agents who sell us insurance, it’s not in their interest to offer us things that will lower our premiums. That’s going to change. So it means changing the cost structure. It means investing in risk mitigation solutions or partnering with risk mitigation solution companies and so on. It’s a different business model, but I suspect these will be senior leadership teams at large corporations, financial services like banking, insurance, automobiles. And it’s just hard to imagine a world, John, where like that we won’t ultimately go there. It will likely take time because of all the system changes that are required to get there. But the guys are laying the foundation for value propositions that are very different than what they were in the absence they are. Speaker 1 [00:18:42] In just a moment, Professor Agarwal will give us his thoughts on how Ottawa is regulating and stimulating the innovation economy and how businesses can make the most of the power of AI predictions. Back in a minute. Speaker 3 [00:18:59] You’re listening to Disruptors, an RBC podcast. I’m from Theresa Doerr. I’d like to share with you our latest agriculture report from RBC Economics on thought leadership called The Transformative Seven Technologies That Can Drive Canada’s Next Green Revolution. In it, we identify seven key agtech innovations we believe can both meaningfully reduce emissions and present opportunities for Canada to lead. Some, like anaerobic digesters, carbon capture and precision technology, are ready to scale now. Others, like vertical farms, plant science and cellular agriculture, will be key solutions for the future. In every case, maximizing their potential will mean building the right platforms for collaboration among not just farmers and entrepreneurs, but also investors, corporates and governments. To learn more, visit RBC E-commerce Thought Leadership. Speaker 1 [00:19:57] Welcome back. Today on Disruptors, we’re speaking with Professor AJ Agarwal on the success and failures of AI and how industries can make the most of this powerful technology. One of the takeaways for me from the book is the need to focus on value rather than cost. And too much focus was on cost rather than value creation. And I’m wondering how that changes in a post-pandemic reality, where resilience is as important for many organizations as, say, efficiency is. How do you think about the power of AI in that kind of complex economy? Speaker 2 [00:20:36] I’m interpreting your question as resilience is more important today because we just went through COVID than it was pre-COVID, but we care about it more because it’s just more salient for us. And so that’s a change compared to five years ago. There’s an increased emphasis on resilience today than there was, let’s say, five years ago. And so what role does A.I. play in that? And I would say that think of AI as a prediction tool to help you optimize against things like an objective function. And so no matter what you put in the objective function, AI’s job is to make predictions to optimize against that thing. So in other words, you’re asking it to trade off, say, hey, you know, now resilience is more important to me. I’m willing to trade offs and speed or trade offs something else in order to get more resilience. And so the idea says, okay, I’m going to optimize for that now. His job is not to decide what’s the objective. That’s our job. But once we set the objective, then AI’s job is to do the the statistical calculations to make its predictions accordingly. Speaker 1 [00:21:37] This can also be really helpful in terms of how we think about jobs and the evolution of work. You mentioned early on in the conversation the great Geoffrey Hinton, one of the godfathers of modern AI. I still remember something he said that I think was wrong maybe five years ago, and this was to do with radiologists. And he said declaratively, we should stop training radiologists right now. They will not be needed. And you have a fascinating chart in the book of all the tasks that a professional radiologists is required to do. I think it was 30, and of the 30 only one that machine learning could replace the rest involved humans. So we’re actually going to need radiologists for a very long time. How are you thinking differently about A.I. in its impact on the workforce? Speaker 2 [00:22:27] The reason why it was reasonable for Professor Hinton to make his comment was that while the radiologist has these 30 different tasks and image recognition, that’s one that that where there’s been a lot of advance. That’s one where as a radiology student, you spend the majority of your time training on that task. That’s kind of the defining one of the field. So that’s, I think, why he said it. Yes, the computer scientist is not a manager or I don’t think he would claim he has any expertize in change management. And I think what we all underestimated was how hard that is. And so if you were to take away the image recognition requirement from radiologists, you probably cut out several years of schooling. And maybe ultimately that job could be done by someone who has more basic medical training. But what his remark severely underestimated is the system change in order to do that. He was imagining that everything will change at the pace of the AI’s predictive capabilities. So his thing was, I bet you we can train AI’s to be as good at image recognition as a human within five years. He’s probably right. But he fully underestimated, as I suspect, many people, including the three authors of our book, of how hard it is to change the system. Speaker 1 [00:23:44] There’s been a lot said over the last five, ten years about what AI is going to do to society, particularly how it may fuel discrimination and lead to other negative social outcomes. You make an intriguing argument towards the end of the book about how I may actually turn that tide and may already be reducing discrimination. Yeah. Speaker 2 [00:24:05] So I think the two basic elements to reducing discrimination are step one, detecting it and then step to fixing it. So, for example, Amazon had an item it was using for, for h.R. And it, it was trained on human data and it became very biased in favor of males. So much so that if you were a male applicant but even mentioned the word woman on your CV like said that you are the coach of a women’s soccer team, it would disqualify. And so that became a very high profile, disastrous case of applying A.I. and amplifying bias. But I think once we push harder on this, we’ll find there’s already been quite a bit of evidence for this that I can be much more screwed about than humans, because we can ask it’s so many questions. And then once we find evidence of bias, we can fix it in a much more effective way than we can fix. Once you find evidence of bias, you can go in and fix it. Whereas with humans, it is. Not at all obvious that we can do that. You know, there’s been a lot of effort at various training for so-called unconscious, systematic bias. And the evidence is very mixed of whether that works at all. Speaker 1 [00:25:20] Are we wrong, then, to try to regulate A.I.? Speaker 2 [00:25:23] No, not at all. I think I can be very dangerous like these samples we’ve seen. Speaker 1 [00:25:28] But those were corrected without regulation. And technology can also self-correct. One might argue that too much regulation is going to stymie the innovation that you’ve been making the case for. Speaker 2 [00:25:39] I think that obviously you never want to overregulate, but I do think that some regulation would be not just good for society and, for example, protecting people that might be discriminated against, but actually good for innovation. Because I think once we set the guardrails, it will spur more innovation and more use of A.I. And probably the greatest example of that is the FDA. Before the FDA, nobody would invest the types of of of money that was required to create drugs, which is why that industry before the FDA was really snake oil salespeople, because a citizen, if you got sick, you had no way of evaluating whether something was real or snake oil. And so everyone just assumed, you know, there’s a 50% chance, whatever I get, it’s going to be snake oil. So once the FDA came along, that regulation, well, many people think of it as stifling innovation because it’s so burdensome. It also created the incentive for people to make very significant investments in pharmaceuticals, because they knew that once we clear that, that there’s a third party verification that this thing works. Speaker 1 [00:26:42] AJ As we move towards close, I’d love to get your perspective on how Canada is doing in a I. It’s been roughly five years now since the launch of a national A.I. strategy. The government, federal government has invested hundreds of millions of dollars and committed more to two, five, five years is a very short period of time with which to assess any policy impact. But generally, how do you think we’re doing? Speaker 2 [00:27:07] I think we’re still doing very well on the research side, and I think the government deserves a lot of credit for that. In other words, we had some early successes in this field with you already mentioned Jeff in Toronto, Joshua Benjamin of Montreal, Rich Sutton, University of Alberta, and then a whole host of others that both faculty and graduate students. And then the development of various research centers. Vector in Toronto, Milan, Montreal, similar. Amy in Alberta We’ve done very well punching above our weight in terms of attracting students to Canada to develop expertize in applied statistics and machine learning and so on. It’s more mixed on the industrial side, on the application side. So part of that is that we don’t own a lot of the infrastructure that needs to be embedded into. That’s a challenge. If I were to say, you know, which are the the billion dollar businesses that have been created in Canada that predicated on our expertize. And I you know, there are some but it’s not a huge number. VeriFone is one would me might have been the first one out of the gates to really achieve a significant valuation and acquired acquired by Nasdaq. And then there’s a handful of others across the country now, but there’s not a huge number. You know, I think we’re still in the early innings, but we probably have a fair amount of improvement we could make in terms of leaning hard on the application side into in Canada. Speaker 1 [00:28:32] What do you think would be the single best thing we could do? Speaker 2 [00:28:35] The single best thing we could do, I think, is develop a muscle for experimenting. And it’s not like, you know, a large organization should have one or two experiments, they should have dozens, and they should really be leaning hard into saying, okay, this is not just business as usual. We need to rethink our R&D budget, which is probably this is a bad time right now for companies to be rethinking their R&D budget, given that many are trying to cut costs. But now is the time, because in every industry someone’s going to do it. Speaker 1 [00:29:09] In fact, it’s probably the best time to do that because your competitors may be tightening up and this is where you can really make some moves, at least for the daring. What a great inspirational call to action. AJ Let the age of experimentation begin. Thank you for being on Disruptors. Speaker 2 [00:29:24] My pleasure, John. Thanks for having me and thanks for your interest in our new book. Speaker 1 [00:29:29] My guest today was Ajay Agarwal, professor at the University of Toronto’s Rotman School of Management and the Jeffrey Tambor chair in Entrepreneurship and Innovation. His latest book is called Power and Prediction The Disruptive Economics of Artificial Intelligence, which he co-wrote with fellow Rotman profs, Joshua Gans and Avi Goldfarb. If you’d like to read GPT three full episode summaries which are actually quite good, please visit rbc dot com slash Disruptors. And to be fair, since the. I took hours to learn my voice. Why not let it close out the show? Thanks, John. I’m John Stackhouse. And this is Disruptors, an RBC podcast. Talk to you soon. Speaker 3 [00:30:13] Disruptors, an RBC podcast is created by the RBC Thought Leadership Group and does not constitute a recommendation for any organization, product or service. It’s produced and recorded by JAR Audio. For more disruptors content like or subscribe wherever you get your podcasts and visit our rbc.com slash disruptors.