Bruce Linton

Co-Founder - Ruckify

Peer-to-Peer Lending Driving the Sharing Economy

Published on August 17, 2020

Takeaways

As the economy recovers from COVID-19, the federal and provincial governments need to decide if they are going to invest in entrepreneurs or tax their three pillars of reward—stock options, capital gains and wealth transfer.
The sharing economy is likely to grow as consumerism shifts towards sustainability and environmentalism, as well as the need for consumers to spend less and save more following COVID-19.
Young entrepreneurs need to consider policy and the public perceptions that drive it—particularly as it relates to climate change—to get ahead of the curve and fill market needs as the economy moves forward.

Action

The Minister of Finance should require that 50% of Canada’s major pension funds be reinvested in small, medium and large capitalizations within the country. This would help to build the entrepreneurship ecosystem while growing our economy and ensuring pensions have strong returns on investment.

How can Canada sustainably and effectively grow its entrepreneurship ecosystem?

One way to grow our entrepreneurship ecosystem is to capitalize on our diversity. Although Canada will always have a small market relative to the United States, we are made up of a more diverse population.

“One way to grow our entrepreneurship ecosystem is to capitalize on our diversity.”

Are there other countries where more than 50% of the largest city’s population was born outside of its borders? Having this diversity in Canada means that if I wanted to find somebody with knowledge of another region of the world, I would have an advantage of place of origin and would be able to stack technology that serves those markets. Canada needs to think about the capacity we have based on the global connections that exist here and how we globalize, while everybody else turns inward, hiding in their own country and economy and shortening their supply chains.

COVID-19 might actually give us a window where we can rapidly flip our priorities, and it is a really interesting time for our leadership. This is a time when federal and provincial leadership needs to step up and say we have a latent advantage that, following COVID-19, will allow us to take a bigger share of the global market in the categories we succeed at most.

My worry is that the government is going to penalize entrepreneurs as they try to catch up on COVID-19 by taxing their three pillars of reward: stock options, capital gains and wealth transfer. Do you know what that does to entrepreneurs? Even if you love the business you do, the financial reward is materially diminished. When we exit COVID-19, we have to decide if we are going to fund Canada’s entrepreneurial environments or penalize them with more taxes.

We have good companies in artificial intelligence and unicorns like Shopify, which are good influences, but we need more depth and breadth in the entrepreneurial ecosystem—not just a few stellar, iconic businesses. What I want is a richer stream of more startups that are well-capitalized. The only reason there are not more of them is the limited amount of money that is pouring into those that appear to be de-risked.

“When we exit COVID-19, we have to decide if we are going to fund Canada’s entrepreneurial environments or penalize them with more taxes.”

Unfortunately, right now there is no supply of capital at a reasonable price that is not competing with resources outside of the country. I would suggest that government-funded cohorts, like teachers for example, should have to invest 50% of their pension fund into Canadian products. Right now, we do not have a sovereign wealth fund because large pools of capital are invested outside of the country, but we need to find a way to keep that capital in Canada.

I would tell them that half of your capital by the end of the year needs to be deployed in Canadian assets. You can have 75% invested in large Canadian companies, but you need to take 25% and put it into Canada’s startups or small capitalization companies. That way, Canada’s small capitalization companies become medium-sized ones, and large capitalization and entrepreneurs have more opportunities to make investments while the entrepreneurship ecosystem grows.

What is driving the sharing economy in Canada? How is it expected to grow?

The sharing economy keeps evolving. If I told you ten years ago that I was going to travel to a city and sleep in a stranger’s house, you would say that is not a good idea. If I said I am going to travel to the airport in the back of a stranger’s car who is not a taxi or limo driver, you would have questioned my sanity. Companies like Uber and Airbnb were born after 2007 and 2008, when people had to figure out how to monetize their assets so they could make their car or mortgage payments. The recession was a primary driver of the sharing economy.

Ruckify is not dissimilar but we are motivated by a secondary driver of the sharing economy: environmentalism. Unlike Uber and Airbnb, the assets that our users lend out—which are used one hour a day or once a year—are produced by extracting nefarious materials from the earth, burrowing holes in the earth to take out fossil fuels, wrapping products in styrofoam and plastic, and shipping them from China so they can sit in a big box store or online marketplace. The negative impact that the sum of these objects has on the environment is grotesque.

One of the reasons a sharing economy makes sense right now during COVID-19 is that people are noticing that the skies are bluer in Los Angeles and that cities are nicer without planes constantly flying overhead. I believe there are going to be more environmentally-conscious discussions about sustainable options. I think that companies are going to implement revised travel policies because they are concerned about the massive carbon footprint we are making, and this mentality is represented in Ruckify. For example, I am going canoeing this summer, and I could buy a canoe—but why would I? There are enough on the planet for the next 10 years.

“Consumerism is changing. There is more of an awareness of environmentalism and the desire to spend on experiences rather than material goods, and that aligns well with the sharing economy.”

The sharing economy is bringing value to the consumer. Uber, for example, does not keep all of the money that it gains from the disruption it caused the taxi industry. You know who keeps it? The consumer. Ultimately, Ruckify increases the consumer’s capital without necessarily increasing the amount of money they spend each year—this could mean that people have more money to retire, or they spend more money on eating at restaurants.

I also believe, as with every generation, that consumerism is changing. There is more of an awareness of environmentalism and the desire to spend on experiences rather than material goods, and that aligns well with the sharing economy.

How can Canadian companies increase their levels of diversity and inclusion? Where is Canada today on this transition?

I believe companies need to change the way they measure progress in these three areas of employment. If you measure earnings before interest taxes and depreciation and amortization (EBITDA), you know what you get? An increased EBITDA. If you do not measure it you will never get it, so if you are trying to increase gender parity, for example, you have to measure, report and then determine what it means. The gap between talking and doing is measuring.

“Right now, we are accepting our diversity, but we are not embracing it and using it as the huge advantage that it is.”

In some cases, Canada is better than average on measures of inclusion. Most tech companies are like the United Nations, and I love it. One of the best days at one of our tech companies was a potluck lunch where everyone brought something that either their mom or dad would cook, and it was great—so from my experience, we are doing quite well in terms of inclusion in tech.

However, I still feel like Canada is not doing enough to take advantage of our diversity. It is good that we have every colour in the spectrum and every name in the phonebook—but how are we going to win with it? We cannot just pay lip service. Right now, we are accepting our diversity, but we are not embracing it and using it as the huge advantage that it is.

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What advice would you give right now to a young entrepreneur who is also trying to create a business that has a social impact?

First, entrepreneurs should not focus on solving problems—instead, they should focus on opportunity. Money does not like to go towards problem-solving, what it really likes is opportunity, which is essentially the same thing dressed differently.

Problems have a negative connotation and when you list them, you have to hope you’re an expert on everything so that you can define your problem in such a skilled way that investors cannot pull the carpet from under your feet. An opportunity is a calculation of size—a need, a want and a price point—and it frames a reason to move forward. A definition of a problem is understanding what the inversion of that is in terms of a solution. But before identifying the opportunity, you have to look at public policy.

You have to look at public policy to gain a sense of the direction of the economy and the public perceptions that are driving it. For example, if you call the Ministry of Environment, ask them if they are going to ban styrofoam. If they are, then your invention made out of hemp is terrific. Most people want to identify a problem and then create a business, but you know what you end up with? A problem. You have to think: public policy, opportunity, action.

“New entrepreneurs need to develop a sales pitch that says: this is awesome, and by the way, it is good for the planet.”

If I had to start a new company, I would be thinking about climate change. Canada is going to be hotter, dryer, wetter, colder—and so I would look at Canada and identify the advantages and disadvantages. Although I hate to say it, climate change has winners and losers, so entrepreneurs have to get ahead of the curve. New entrepreneurs need to develop a sales pitch that says: this is awesome, and by the way, it is good for the planet.

If you could suggest one thing to improve Canada’s economy, particularly as it relates to sustainability, what would it be?

If I was king of the country, I would immediately announce that we are building a national high-speed, hydrogen-powered train line. This is a good example of a project that makes sense because it will work to unite our country and eliminate regionalism. Having spent a lot of time across Manitoba, the West Coast and Alberta, I find the perception that those regions are not socially aware to be untrue. It is often also thought that Ontario and Quebec are the “enlightened” regions, and the Maritimes are playing catch-up—but this is also not true. The more we think this way, the more the cohesion of our country suffers.

I want people to travel across the country and for Canada to become a leader in hydrogen-powered vehicles—we can become a thought centre for that sector of the economy and we need macro actions in order to come together as a nation a little more.

I have been across the country and interacted with people, and it is nonsense that we are all different—that needs to be conquered. This means we have to have a connective tissue and conversations.

“I have been across the country and interacted with people, and it is nonsense that we are all different—that needs to be conquered.”

After building the hydrogen high-speed train, I would start a youth exchange program for kids between 15 and 19 years old, because when you explore Canada and learn the truth at that age, it applies to your entire life.