The Opportunity Cost of Policy Fragmentation

Trump-induced chaos is rife with opportunity that Canada is likely going to miss

One of the recent acts of random destruction by Trump and DOGE was to defund or pause an enormous swath of research grants, in particular those managed by the National Science Foundation. They also capped the overheads that universities could charge on these grants at 15%, down from numbers as high as 60%. In combination, this has left many American scientists in a state of uncertainty with respect to the viability of their research programs, going as far as causing universities to have to drop previously accepted graduate students.

Recently the idea was advanced that some of these scientists could be enticed to come to Canada, reversing the brain drain of Canadian technical talent to the United States. At first glance it is a powerful idea, and an opportunity that is clearly on the table. On the other hand, Canadian universities are in bad shape, and can barely afford the status quo, let alone taking on significant new hires. To take advantage of this once-in-a-generation opportunity requires significant resources be put into universities, at a time when the trend was very much in the opposite direction even before hurricane Trump.

As

Paul Wells

puts it, there is currently a crisis of confidence in Canadian universities. I encourage you to listen to his conversation below, which provides an insightful look at some of the issues at play.

A crisis of confidence in Canadian universities

In this post, I explore the idea of trying to import defunded scientific talent against the backdrop of the discussion points raised by Paul. If these issues can be addressed quickly, then the opportunity to attract American scientific talent and reverse Canada’s much-lamented brain drain is there for the taking, but we cannot put the cart before the horse and hope for a productive outcome.

Perspective and Context

Government

When the government at any level discusses universities at all, the messaging is rarely favorable. The podcast above provides a broad overview of the myriad reasons for this, including what I believe to be at the core of it: decades of failure to translate research into economic and social benefit.

Canada has invested billions in academic research over the previous decades, and with the exception of a few localized tech ecosystems has very little to show for it aside from general agreement that Canada produces lots of good research. Most of the outputs of that research either exit the country before economic benefit can be extracted (an issue for which every stakeholder points the finger at every other stakeholder), get stuck on the shelf of a university tech transfer office, or never advances past publication at all.

The government is no longer buying the idea that simply funding research will achieve economic and social impact, and all available evidence suggests that they are correct in this assessment (while misunderstanding cause and effect). As a result, failure to commercialize research has (mistakenly, in my view) been laid at the feet of universities, a mistake that has somewhat ironically been reinforced by a recent focus on commercialization in university messaging.

Self-inflicted wounds aside, it is not clear why the government and funding agencies ever thought that universities would deliver economic value given that structurally there is neither directive nor incentive to do so.

Going back as far as this issue has been studied, it has been raised repeatedly that university research lacks a bridge to cross the valley of death between academic research and commercial operations, with various reports over the years explicitly calling for research funding agencies to take an active hand in both mandating and supporting those outcomes. To date, government at all levels have failed to act constructively on that advice, mostly ignoring or occasionally cutting ineffective initiatives without conducting effective failure analysis (or trying to pass failure off as mission success), delaying action, or losing sight of the mission in seeking to enact effective means to address the issue.

Without a mandate to do so and a direct, measurable line between research funding and well-defined impact assessment, it is a foregone conclusion that research will not translate to impact.

Private Sector

One of the themes that came up clearly in my most recent interview is a deep disconnect between the research that happens in universities and the actual needs of industry, resulting in the development of tools and technologies in search of a problem to address, rather than the other way around. This is not all that surprising, and is not in and of itself a problem. Paul Wells explains why far more eloquently than I can:

Geoffrey Hinton’s work on AI was considered a terrible bet for many years before it started to pay off huge. Tony Pawson’s work on signal transduction in cells began with a question about an odd virus that occurs naturally in chickens. For decades, in three different countries, he managed to get funding for his research, but at the beginning, nobody was excited about the research. They were more excited later, when Pawson’s discoveries led to a global industry in protein kinase inhibitors, a class of drugs worth tens of billions of dollars.

So you just never know what you’ll get. Increasingly, governments hate that. They don’t know how to explain it to their bosses.

Universities have only in recent years been seen as potential sources of economic impact due to high-profile outliers like the above.

The point of academic research has historically been exploration, with impact as an occasional bi-product often disconnected from the research by decades. Current pressures are shortening those timeline expectations, but a significant portion of university researchers bristle at the idea of having any part of their research focus dictated to them by external priorities.

The bridge between private sector needs and university research lies in procurement and technology matching between problems and solutions. The role of the SBIR in the United States is an excellent example: government agencies put out challenge calls, fund the pre-commercial development (almost always in startups) and then provide a first customer. Canada’s structurally identical ISC program failed utterly to deliver comparable results because it failed to adapt the SBIR approach to take into account the contextual differences. The SBIR works because of scale, with any technology coming out of a university lab being able to find a matching challenge call from among the thousands available. Canada’s ISC funded just a few tens of ideas before getting the axe, insufficient to address the issue by at least an order of magnitude.

For procurement to work in Canada, we need to look beyond just governments as the means to do it. The Canadian government will never have the technological appetite to provide a path to market for all of the potential technologies arising from Canadian universities, but it could easily fund and provide the technological discovery hub that connects research-based innovations to private-sector players in need of a solution. In fact, it could go further, connecting Canadian innovation to the global private sector, but funding development of Canadian startups to bring innovations to market in response to global demand for solutions, rather than just those in Canada. What better agency to track, catalogue, and make discoverable by the private sector the research being conducted in Canadian universities than that which funds it?

The key point here is that for a small country like Canada, merely matching technologies to end users as an end goal is a recipe for giving away technologies, whereas matching technologies to end users with the intention of then supporting commercial exploitation of those technologies by Canadian startups enroute to selling to those end users is a much more promising path.

Universities

Caught between these issues, Canadian universities are in crisis. The caps to international student enrollment have most Canadian universities running crippling deficits, and the likelihood of funding cuts regardless of which party makes up the next government could well force significant restructuring or closures. While many Canadian universities are now starting to develop commercialization programs in response to the increasing pressure to realize impact beyond the lab, these are, with a literal handful of exceptions, still too early to make a convincing case for long-term impact.

Canada is not alone with respect to issues securing benefit from research funding. While the Bayh-Dole framework in the United States is an exception to the rule, many ecosystems comparable to Canada face similar issues. A recent paper that studies the post-secondary ecosystem in Sweden, for example, finds that far from achieving economic impact, research funding to universities is actually negatively correlated with regional incomes, identifying all the same problems as we have in Canada. On the other hand, there are exceptions that prove this is not a fundamental property of universities, even in relatively small economies, as Israel has built a highly integrated and very effective innovation pipeline that begins with post-secondary research.

Clearly, the problem is not that universities cannot deliver economic impact. The issue is more nuanced, and lies in the complete lack of coordination between universities and the private sector, coordination which must be mediated by government programs.

Commercialization has never been an explicit part of the mandate given to Canadian universities by the main funding agencies. I know this because I have written a very large number of successfully funded grant applications, across most of the sources for STEM funding available to Canadian researchers, and I have attempted to commercialize some of that research. “Benefit to Canada” (or, sometimes, the province) is a common part of most STEM grant applications, but there is no follow up or defined means to measure that benefit, making it at best lip service to a poorly-defined requirement and at worst a post hoc means for funding agencies to rationalize performance.

For better or for worse, universities need to recognize that their role in society is changing, and adapt to this new reality by prioritizing impact (economic and social) beyond the lab, but this will not happen without an explicit mandate to do so.

In a previous post, I reviewed a very effective playbook for achieving this, but for Canadian universities it means undertaking a fundamental transformation at a time when budgets are stretched far too thin for the task.

It is counterproductive to punish universities with budget cuts in response to failure to deliver on a mandate they were only given retroactively, without any clear definition of what it would have meant to succeed.

Should we try to import American scientists?

My conclusion, in a nutshell, is that we are not ready to achieve any value from attracting American scientists, and will not be until we can get past the finger pointing and work collaboratively to align universities, government, and the private sector on both the role of universities in bringing value to society and the metrics by which we assess it.

However, this should not be taken as a suggestion that importing defunded American scientists is a bad idea. On the contrary, it is an excellent idea that has simply been advanced before Canada is ready for it, an idea that could be incredibly valuable if we can get our act together immediately.

This should be a wakeup call, a clear signal that our inability to achieve alignment across the innovation pipeline comes at enormous cost, both in the form of direct lost technological opportunities and in the form of missed opportunities like this one.

There has never been a better time to push for this sort of quick realignment. The provinces have already made more progress on internal trade barriers in a few weeks than in the preceding decade, and this is the most united I have seen Canadians in my lifetime. Use this momentum to push for the change that needs to happen, so that we can capitalize on the opportunities before us.

Begin with the end in mind

The common thread linking all of the issues identified above is that change must be led from the policy side. Until there is a clear mandate given to universities combined with measurable definitions of success and funding to execute, adding more scientists to the talent pool will not achieve anything productive.

On the private sector side, public-private partnerships focused on commercialization of specific technologies are used in most successful innovation ecosystems as a means to get technologies out of the lab and into the market, with a focus on active matchmaking between technologies and receptor organizations, has come up more than once in my own conversations across several technology sectors. Early-stage public-sector matching of private sector investments in innovative technologies is a proven means of increasing private-sector risk-tolerance.

The last question to be answered, or course, is how to pay for all of this. “Luckily,” there are 140 different innovation support programs we have in place that are collectively delivering very little. Instead of looking for savings from the foundations of the technological innovation pipeline, we should start with the scaffolding.

Whole-of-government leadership on innovation is prerequisite to securing value from research, including by importing the scientific talent that the United States is currently leaving by the wayside, but if we do not act immediately, we will miss the chance.