Archive for the The Chairman’s Corner Category

A couple of years ago, my wife and I spent a week visiting Washington.  It was a beautiful Fall week, and we took in all of the sights – the White House, the Capitol, the National Mall, all the Memorials and as much of the Smithsonian as we could cram into our visit.  We dug deeply and broadly, and had a great holiday that was relaxing, educational and inspiring.

It was that last aspect of the experience that was most surprising and noteworthy.  As Canadians, we tend to be very cynical about the mythology of America.  We are right in their face; up that close, it easy to see the blemishes.  But the treatment of the American story in Washington, and in particular at the American History Museum of the Smithsonian, is disarming.  The dark side of American history – the overtly brutal conquest of their indigenous peoples, slavery, the Civil War, Jim Crow, Viet Nam – are neither hidden nor whitewashed.  They are there in plain sight, and presented with a solemnity that is both apologetic and implies “we can and must do better”.

What struck me on that visit was the recognition that perhaps what the rest of the world in general and Canadians in particular miss when we dismiss Americans’ blithe patriotic claims to be “the greatest nation on the planet” is this: what makes America great is not what it is, was or ever will be, but what it aspires to be.  It is the boldness and idealism of their reach that defines them as a unique global actor, notwithstanding the more than occasional venality of their grasp.

The Canadian ethos stands in stark contrast.  It took almost one hundred years for Canada to assert an entirely independent worldview, and another fifty before we were bold enough to reclaim our own Constitution.  Our ambition has always been modest, particularly so relative to our accomplishments in the context of the great military challenges that have arisen in our still brief history as a nation.  Our grasp has consistently exceeded our reach.

It is that defining character that makes the agenda of the new Liberal government both appealing and disorienting.  Reasonable people (myself included) were well aware that 25,000 Syrian refugees could not be relocated to Canada in 60 or even 90 days, and that the Liberals’ active and progressive agenda on climate change, infrastructure and relationship renewal with First Nations can’t be done with annual deficits under $10 billion and a return to a balanced budget by 2019.  Nevertheless,  we were still inspired by the aspiration.  Even the Liberal campaign slogan of “better is always possible” was a far cry from the “doing the best we can with the cards we are dealt” that would better reflect our ambitions historically.

Americans are quick to reward those who over-promise and slower to punish those who under-deliver; Canadians have not been so inclined.   It remains to be seen if the election of 2015 represents an about face in that cultural distinction or the basis for crushing buyer’s remorse.

As some of you may be aware, TAO’s Mission Statement is to assemble and maintain the knowledge, skills and experience that will allow us to develop and pursue a strategy that optimizes our ability to be relevant to any and all North American enterprises that utilize or should utilize Structured Finance concepts and programs as part of their financing platform. In a rapidly evolving and fragmented marketplace for financial services, no firm can hope to remain at all times and in all respects at the cutting edge; seeking to be continually relevant is the winning long term strategy.
It wasn’t hard to identify maintaining relevance in an evolving business environment as TAO’s leading strategic challenge. The challenge on a personal level is pretty much the same. As I and all around me age, I am constantly reminded of the challenges of maintaining if not finding relevance as a son to aging parents, a father to adult children and a spouse to an empty nest partner. Individuals and institutions must evolve with changing circumstances or be doomed to irrelevance.

Which brings me to Christmas, a Western institution with a longer history than the Hudson’s Bay Company and an even greater cultural penetration than (dare I say it) Facebook. As a child in the Sixties, the reality of where Canadian society was and where it was heading was sufficiently ignored to allow us to believe that we could collectively share the Christmas tradition as a community builder in the context of its literal meaning, the celebration of the birth of Christ. “Merry Christmas” was a wonderful seasonal greeting through which we reassured ourselves and strangers of our common belief in the context of an increasingly complicated and alienating world.

Unfortunately, the requirement of relevance is now bearing down on the public celebration of Christmas. If you offer a “Merry Christmas” to everyone you meet on the street in the month of December, one of three of your recipients would feel no immediate common bond in your greeting. Faced with this challenge to its relevance, any institution, including Christmas, has only three choices. The first alternative is to drive on without accommodation, and painfully allow a touchstone of goodwill to all to become a ritual of division. The second alternative is to mandate the elimination of all public observance, following the model advocated in Quebec’s abandoned Secularism Charter, smothering rather than celebrating the diversity of expression of our common humanity.
The third alternative is by far the richest and most hopeful, and that is to allow the institution to evolve. We could recast the public face of Christmas in its universal essence, the celebration of the primacy of family and the miracle of birth as the kernels of hope for the world, all the while conceding room and respect for those whose observance is more literal. And if we can do that for Christmas, can we not do the same for Yom Kippur, Eid al-Fitr and the myriad other religious traditions that are now integral parts of the Canadian community? Sadly, if this challenge is beyond our collective will and tolerance, then the public celebration of religious traditions that are in their essence a reflection of our common humanity will be untenable in a multicultural and inclusive nation. And we will all be poorer for it.

Merry Christmas to ALL.

In our first TAO management meeting following the October 19th election, we were discussing the potential impact of the Liberal majority upon our business. One of my colleagues observed that, with the expectation of closer co-operation between the Liberals in Ottawa and Toronto, we were at least likely to be spared the payroll administration inefficiency of the recently announced Ontario Retirement Pension Plan operating independent of the existing Canada Pension Plan infrastructure. Fair enough; but before saluting this apparent “Win-Wynne”, it merits a moment to consider more thoughtfully the wisdom of this proposed expansion of our social safety net.

Government taking a leadership role in the socialization of risk among it citizenry is a laudable and appropriate exercise of legislative discretion. Notwithstanding all of its shortcomings and challenges, the universality of Canadian healthcare is a public policy distinction from the US that all Canadians should be thankful for and proud of. However, it remains equally axiomatic that public policy should never infantilize its constituents by doing for them that which they have the ability to do as well or better for themselves. Health challenges are cruelly random in the timing and severity of their impact upon individuals and families; collectivization of this risk is both prudent and moral. The timing and certainty of the need for retirement savings, on the other hand, are largely predictable, and accordingly merit a very different public policy prescription.

In times and jurisdictions in which the expectation of intergenerational transfers of wealth and care were the primary if not sole means of managing this risk, it is true that individual citizens assumed unacceptable levels of risk with respect to their lifestyle in retirement. However, the availability of products and tools for financial planning has radically transformed the management of this risk. Deferring consumption to accumulate appropriate savings is an individual responsibility that can be managed in a wide variety of ways. Some may defer the creation and funding of formal retirement savings to direct more available cash into increasing equity in appreciating residential real estate, others into businesses, still others in continuing advanced and/or specialized education. All of these represent reasonable approaches to wealth accumulation that may or may not be the optimal strategy in the circumstances of the particular individual, but it is in any event their choice to make.

No one can deny that a portion of the challenge to retirement planning for lower income Canadians is their inability to defer any portion of their earnings away from current spending needs for the necessities of life. Unfortunately, the proposed ORPP does not purport to redistribute funds among taxpayers to augment retirement savings, but merely redirect amounts from employers and employees that we can and should assume would otherwise have been paid as current period wages. Policy solutions to raise the level of earnings paid to Canadians to meet not only current needs but also permit a modest amount of wealth accumulation are urgently needed, but that is not the ORPP. Similarly, lower income-earning Canadians may be handicapped by the unavailability of the low cost, highly skilled discretionary fund managers that can be accessed by high net worth investors. The opportunity for Canadians to voluntarily direct a portion of their earnings into the CPP (even by source deduction) would seem an appropriate public policy response to this inequity, but, once again, that is not the ORPP.

The progress of modern capitalist democracies has been marked by a relentless and in most cases prudent expansion of the social safety net. We have not yet run out of devastating and random risks borne by our fellow citizens that can be socialized. Perhaps an ambitious national Pharmacare program is a more worthy complement to the success of our healthcare system than an expanded Government-mandated retirement savings program.