Productivity in the Modern Economy: Own Intellectual Property and Control Data  

In today’s rapidly evolving economic landscape, the key to productivity and success lies not in traditional notions of work output but in the ownership of intellectual property and control of data. As we work through the complexities of the 21st-century economy, it’s becoming increasingly clear that those who own and control intellectual property and data are positioned to dominate markets and shape the future of industries.

The Shifting Paradigm of Productivity

The concept of productivity has undergone a dramatic transformation over the last 100 years. To understand this shift, let’s consider the evolution of agricultural practices:

1. In the beginning, productivity meant planting seeds by hand, nurturing crops, and harvesting the land through manual labour.

2. As technology advanced, productivity increased through the use of machinery like tractors, allowing farmers to cultivate larger areas with less effort.

3. Today, however, true economic power lies not in operating the tractor but in owning the intellectual property behind its innovative design and controlling the data generated from its use.

This progression illustrates a fundamental truth about the modern economy: it is no longer about doing the work yourself or even owning the physical means of production. Instead, productivity today is about controlling the ideas and information and collecting rents on innovation across entire value chains.

The New Economic Model: Rent Collection and Value Chain Expansion

In today’s economy, the most successful entities don’t just create products or provide services; they build ecosystems of innovation and data that allow them to collect “rents” on their intellectual property while continuously expanding their influence across various sectors and preventing their competitors from doing the same.

Here’s how this model typically unfolds:

1. Develop innovative technology or processes, secure strong intellectual property protection, and manage freedom to operate.

2. Deploy this technology to the market, collecting revenue without the need for direct involvement in production.

3. Gather data from the use of your technology across various applications.

4. Leverage this data to create new innovations, control new markets, and extend control along the value chain.

This approach creates a self-reinforcing cycle of innovation, data collection, and market expansion that can lead to dominance across multiple industries. Every new data set increases the value of preexisting data in the hands of the same company. This is why data-driven economies feature monopolistic behaviour and structurally uncompetitive markets. 

Case Study: Amazon’s Strategic Evolution

Amazon’s journey from an online bookstore to a global tech giant perfectly exemplifies this strategy:

1. Amazon started by selling books online but quickly developed and patented its “1-Click” check-out method, a seemingly simple innovation that proved to be worth billions.

2. This proprietary checkout method gave Amazon a significant edge over competitors like Barnes & Noble, effectively locking them out of providing easy online transactions.

3. Amazon then leveraged this advantage to expand into selling a vast array of products online, all while collecting valuable customer data.

4. Recognizing the value of data storage and processing, Amazon developed Amazon Web Services (AWS), turning its internal infrastructure into a lucrative cloud computing platform.

5. The success of AWS provided Amazon with unparalleled insights into data trends across industries, enabling further expansion into areas like content delivery (Amazon Prime), manufacturing, and even healthcare.

Throughout this evolution, Amazon’s core strategy has been to control key technologies and data, using this position to continually expand into new verticals and capture more value along extended supply chains.

The Global Context: Value Chains and Freedom to Operate

In the global economy, success is increasingly defined by a company’s or country’s position within international value chains. Owning crucial intellectual property and controlling data flows allows entities to:

1. Collect ongoing revenues from their innovations

2. Prevent competitors from easily entering their markets 

3. Expand into adjacent industries and create new markets

Crucially, this approach requires maintaining “freedom to operate,” ensuring that others’ intellectual property rights do not constrain your own growth. This delicate balance of asserting your own intellectual property while navigating around others’ is a key challenge in today’s global marketplaces.

The Pitfall of Technology Adoption Without Ownership

Countries and companies that understand these principles are poised for success in the global economy. However, many countries and companies fall into the trap of believing that merely adopting and buying cutting-edge technologies is sufficient for economic success, especially productivity growth. 

While adopting new technologies can increase efficiency in the short term, it does not provide long-term productivity benefits. Productivity in the modern economy comes from owning valuable intellectual property and controlling relevant data. In fact, using someone else’s technology often serves to strengthen the position of the technology’s original creators, reinforcing their control over the value chain. Simply purchasing or implementing someone else’s technology, whether it’s advanced tractors, AI systems, or other innovations, will not sufficiently raise productivity as compared with other advanced economies.

Canada’s Position in the OECD

Unfortunately, some nations, like Canada, are at risk of falling behind in the global economy because they fail to appreciate the impact of owning intellectual property and controlling data in international value chains. According to recent OECD projections, Canada’s economic outlook is devastatingly dreadful:  “Canada will be the worst performing advanced economy over 2030-2060”. This is because the country does not sufficiently own or control the ideas driving key industries. Canada is a buyer of technology, not a seller. 

Consider general-purpose technologies like artificial intelligence (AI), cutting-edge sectors like electric vehicles (EVs), and advanced mining technologies. In these crucial areas, Canada owns less than 1% of the foundational intellectual property. This lack of ownership places Canada at a severe disadvantage in the global innovation economy. Rather than encouraging job creation or attracting foreign companies within these sectors, Canada must begin to control the underlying intellectual property and generated data and must deploy policy levers that enable Canadian companies to do so.

The Path Forward

As we look to the future, it is clear that economic success will increasingly depend on the ownership and strategic use of intellectual property and control of data assets. Countries and companies must shift their focus from merely adopting technologies to developing and controlling the innovations that drive entire industries. 

Today, Canada is still stuck in the trap of believing that merely adopting technology developed by someone else, such as AI tools controlled by companies outside of Canada, is sufficient for economic success. Canada needs to focus on improving its economic outlook by owning the intellectual property developed within its borders and then controlling and leveraging the resulting data.

For Canada to improve its economic outlook, Canadian policymakers must prioritize policies that support the creation and retention of valuable intellectual property and data within Canadian firms.

By embracing the modern paradigm of productivity—one based on idea ownership and data control Canada and its companies can position themselves at the forefront of the global innovation economy, driving growth and shaping the industries of tomorrow.