Company Logo Tuesday, October 18, 2005

Einstein at Oktoberfest

In Kitchener-Waterloo, innovation goes hand in hand with lederhosen


At the Transylvania Club on Andrew Street in Kitchener, Ont., waiters served heaping plates of schnitzel, sausage and sauerkraut to hundreds of revellers. Uncle Hans, the Oktoberfest mascot -- furry, with a spherical orange head -- tottered into the hall while the band played Roll Out the Barrel. John Turner, the former prime minister of Canada -- furry, with a spherical orange head -- tapped the keg. Pitchers of fresh beer were rushed to every table.

So this is Oktoberfest. But a few blocks away, at the Perimeter Institute for Theoretical Physics in Waterloo, a different crowd was enjoying a lecture about trends in philosophy in 1905, the year Einstein published some of his most important discoveries. This was part of Perimeter's month-long, ambitious and very popular EinsteinFest.

This is another part of life in this increasingly fascinating region of southwestern Ontario bordered, roughly, by the cities of Waterloo, Kitchener and Cambridge -- Canada's "technology triangle," as some people there call it. Tradition and innovation. Beer steins and Einstein. At lunch the guy sitting next to me searched his lederhosen and said, "The only problem with these things is, there's no place to put a BlackBerry."

The guy sitting next to him was Tim Jackson, a founding partner of Tech Capital Partners, a venture-capital company that only funds startups in the area. Jackson's company started with a $5-million fund in 1999, came back with a $30-million fund a few years later, and launched a $50-million fund earlier this spring. (After a couple of days in Waterloo, you get used to seeing growth curves like that.) There's no shortage of candidates for Tech Capital's seed money, Jackson said. "We're busier than we've ever been. Last year, we looked at 140 deals in aggregate. This year, to date, we're somewhere north of 150."

How did all those entrepreneurs spring up from the region's loamy soil? One big answer, of course, is the University of Waterloo, such a formidable school it was the only Canadian destination when Bill Gates visited six universities last week to inspire students about the joys of software engineering.

But lots of towns have universities. (There's another very good one, Wilfrid Laurier, in this region.) Only the University of Waterloo made two smart choices a generation ago. First it instituted Canada's largest co-operative education program. Students spend a huge chunk of their university years working in the private sector. It gets them into the habit of thinking about how ideas can be made to work in the real world.

The second smart decision, much less noticed, was that intellectual property would reside with individual Waterloo profs instead of with the university. Well. Turns out a researcher who can keep the money his ideas earn in the market comes up with a lot more marketable ideas. A 1999 study showed Waterloo -- just one university out of 84 surveyed in Canada -- had produced 22 per cent of all the spinoff companies from university research.

So Waterloo gave up the royalty benefits from all its smart graduates? Don't cry: the university gets the money back another way, in immense donations from happy grads who wind up stinking rich. Mike Lazaridis, the Research In Motion president, helped build the Perimeter Institute and has given $50 million, so far, to his alma mater's Institute for Quantum Computing.

Quantum computing amounts to a long-term bet that new discoveries about the complex behaviour of individual atoms can form the basis for computers far faster, smaller and more complex than anything now possible. Raymond Laflamme, the institute's director, has boundless ambition for the place. "At present, with nine or 10 researchers, we are equivalent to MIT, Cal Tech or Cambridge," Laflamme told me. "We want to go up to 25. And then there will be no one else like us."

There's a lot of that spirit going around Waterloo and the neighbouring towns. I visited Dalsa Corp., whose fiendishly complex digital-imaging systems are the eyes for NASA's Mars probe and for new all-digital cameras for Hollywood. Dalsa has grown by 30 per cent a year for most of a decade, barely noticed in Canada but without serious competition in the world.

Is all this innovation merely trivial or picturesque? Hardly. The Conference Board of Canada reports that Kitchener will lead the country in economic growth for 2005, along with Saskatoon, whose own knowledge economy is in the early stages of a comparable boom. And what do Oktoberfest and EinsteinFest have in common? Everything, I'm told. The community spirit and cohesiveness on display at Oktoberfest are as much an asset as the area's schools or location. A policy wonk would tell you the tech triangle's abundant social capital helps it build human capital. I'll just say this: watch it go.

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