A Tale of Two Economies

Tony Wanless | | Published: November 09, 2007

A snapshot of the front page of a newspaper business section recently told you everything you need to know about how the BC economy is shaping up in the 21st Century.

The divide between old and new economies is widening.

One story – and most of the page --was about the sale of Vancouver interactive marketing firm Blast Radius to WPP, one of the world’s biggest international advertising conglomerates. No sale numbers were given because Blast is a private company and doesn't have to divulge them.

Amidst the backslapping and cheers -- and worries about how yet another top Vancouver tech company was being bought by some world giant -- was a soothing note. Blast would remain the same even though it had a new owner. Its name, employees and management team would remain in BC. The only thing different would be the owner.

This is how WPP works when it acquires companies. And it probably suited Blast CEO and founder Gurval Caer, who is a mover and shaker in the BC tech world, and in fact was Chairman of the board of the Technology Industry Association last year when it made it clear one of the industry’s biggest problems was the lack of big local companies that could act as anchors. So Caer is sticking to his word on that one.

But Caer also has global ambitions and was running a company that fell victim to the Vancouver disease: Started here, found blue chip clients around the world, grew to mid size (revenues of $48 million), but then hit a growth wall. There comes a certain point in the lives of some BC tech companies where they have to sell out if they plan to keep growing. BC is a verdant farm for technology, but the province doesn't have the horses yet to power a company into the worldwide big leagues.

Meanwhile, also on the page was another story about the shutdown of the only remaining sawmill in Terrace. The West Fraser Timber Skeena Sawmills division mill employs about 80 directly but it supports about 400 other jobs, most involving logging, in the community.

Much of the reasoning behind the shutdown lay with the usual suspects – the recent forestry strike by the United Steelworkers union, the collapse of the US housing market and the soaring Canadian dollar. But, as some analysts pointed out, the deteriorating economics around wood processing was more likely to blame.

It’s no secret that the wood industry as we’ve known it for decades is

fading. Foreign competition and high prices are hurting many such commodities producers, and we’ve never been able to get it together enough to add much value to our wood. We’ve always been content to live off the lowest end of the industrial supply chain.

So while one company involved in the new Internet economy soars, a company rooted in the old resource commodities economy dives. While we may not often see such direct evidence of this trend to economic change, it will be happening constantly in many smaller ways.

The business models that built BC – the simple harvesting of resources like wood, metal, or oil/gas -- are fading in importance. The newer models based on trade in knowledge are gaining.

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