I grew up on a farm in rural New Brunswick. I’m writing this instead of protecting potato fields from blight because I was conditioned at a young age to see farming as a thankless endeavour. The humanities came easier than calculating the optimal dose of fungicide per acre, so here I am.

There’s a reason I’m sharing my origin story. It relates to what I think is the root cause of why Canada’s economy is in so much trouble: our culture of risk aversion has caught up to us. Existing companies don’t want to invest, and talented people don’t want to create new ones. It’s a doom loop that has caused the economy to stagnate.

I wrote about Canada’s flickering entrepreneurial spirit a year ago—and the year before that. It isn’t getting better. Angel investing is at a five-year low and venture investing is at a nine-year low. Business exit rates have exceeded entry rates for the better part of two years. The Canadian Federation of Independent Business (CFIB) calls it an “entrepreneurial drought.”

An economy that fails to create a steady flow of entrepreneurs is destined to stagnate. Sustainable growth requires steady disruption from new ideas and new technology, both of which generate wealth-enhancing productivity. The most reliable source of new ideas and new technology is new entrants. That’s because various psychological biases and profit incentives cause incumbents to stick with what they know. It’s the reason (I think) that Canada suffers from economic melancholy. Too many of our best companies are mature, oligopolistic behemoths that have lost their desire to invest, in part because they face little pressure from upstarts. 

The scale of Prime Minister Mark Carney’s industrial policy will generate economic growth in the short and medium term. But to keep the flywheel turning, he’ll need a new wave of entrepreneurs to take advantage of the wake created by all that spending. The CFIB dislikes the federal government’s emphasis on big projects backed by big funds. Its preferred approach to entrepreneurial drought relief includes cutting the federal preferential income tax rate for small business to six per cent from nine per cent, and all provincial rates to zero; raising the amount of profit that applies to that lower rate to $700,000; and cutting regulation, which the federation says forces small businesses to spend a month’s worth of work hours each year just dealing with red tape.

I like how the CFIB has brought attention to the entrepreneurial drought and I agree that it’s a blind spot in Carney’s plan to revive the economy. But some of those policy ideas sound like they’re designed to benefit its existing members, not inspire those with good ideas to start new companies. 

I bailed on farming before anyone let me near a balance sheet, so maybe I’m unqualified to judge, but I’m skeptical that policy is the reason that Canada is struggling to create new businesses. I think it’s deeper than that. The root cause is culture. 

The latest Global Entrepreneurship Monitor found that Canada has seven of 13 “entrepreneurial framework conditions,” fewer than places such as Estonia and Finland, but more than a handful of countries that are famous for their startup cultures, including the U.S., Israel and Sweden. The first of the CFIB’s two reports on the entrepreneurial drought includes survey data that suggests individual Canadians are more inclined to start a business than their American cousins. But the U.S. economy is more dynamic because too many Canadians are afraid to act on their aspirations: half of us say fear of failure would keep us from starting a company, compared with 42 per cent of Americans. 

Now, combine a deep sense of risk aversion with the drumbeat from the CFIB and others about how hard it is to be an entrepreneur. Some 55 per cent of the federation’s members said last fall that they wouldn’t recommend starting a business. That’s the kind of negativity that drove me off the farm. 

Michael Buhr, the head of C100, a club for Canadian entrepreneurs and investors in Silicon Valley, doesn’t think the issue is taxes or capital or regulation. Those are just obstacles. His experience suggests that what entrepreneurs lack most are role models—real-life evidence that a Canuck with a dream can start and scale a company. “That takes more than capital. And more than one-day conferences where we get inspired and go home,” Buhr wrote on LinkedIn. “Scaling is learned over time—by surrounding our highest-potential founders with people who have actually done it.” 

That’s not woo-woo stuff from some guy who’s been living in Silicon Valley too long. Entrepreneurship is calling, but the call isn’t enough. It’s well established that most of us need to see what’s possible before we leap. Daniel Coyle, author of The Talent Code, calls it ignition. He determined that what separates the greatest talents from the merely talented was deep, dedicated practice. But something has to click before elite performers dedicate themselves to that extra work. 

There were 15 Russians in the Women’s Tennis Association’s Top 100 in 2007, compared with three a decade earlier, Coyle noted. What changed? For one thing, dozens of talented girls watched a 16-year-old Anna Kournikova make it to the semifinals of Wimbledon in 1997. “When we get a cue that we ought to connect our identity with a group, it’s like a hair trigger, like turning on a light switch,” Stanford psychologist Geoff Cohen told Coyne. “The ability to achieve is already there, but the energy put into that ability goes through the roof.”

In his LinkedIn post, Buhr proposed creating a “Technology Company Growth Leader” that would be charged with dramatically increasing the number of Canadian-based growth companies. He’d do it by gathering a select number of companies in a network and surrounding them with established founders, executives and investors for a nine-month period. No tax cuts. No subsidies. No complaining about regulation. Just advice and moral support.

Buhr acknowledged that it might sound like he’s pitching a souped-up version of C100, but he insisted he isn’t empire building. “We have the talent,” he wrote. “We have experienced Canadians around the world who want to help. We know how to do this.” 

So let’s do it. Before it’s too late. 

Kevin Carmichael is The Logic’s economics columnist and editor-at-large. He has spent more than two decades covering economics, business and finance for outlets including Bloomberg News, The Globe and Mail and the Financial Post, where he also served as editor-in-chief.