Building Industry Needs Overhaul

By Bruce Firestone | Uncategorized

Dec 16

There’s no doubt in my mind that this is one of the most conservative industries anywhere. It’s hard to bring about significant change. I’ve spoken extensively about it, in front of generally receptive audiences I might add, but still change has been hard to come by.

It might be that the development business and the construction industry are immune to change so it may have to come from the outside. Perhaps an Elon Musk clone, an outsider, will “tesla” the business. Maybe a 3-d printing company will one day do away with the 25 or 26 trades needed to build a typical house in Ontario. But there is more, much more, that can be done to fix an inestimably poor system.

In 2000, I gave a speech on Parliament Hill for the Indo-Canada Chamber of Commerce. The lessons in it are clear, I believe, but still to this day, not implemented. In it I said this—

Release date: March 24, 2000

Synopsis of Remarks to the Indo-Canada Chamber of Commerce, ICCC-Ottawa Council, First Anniversary Dinner, Key Note Speaker, Room 200, West Block, Parliament Hill

By Dr. Bruce M. Firestone, B.Eng.(Civil), M.Eng.-Sci., PhD

Founder, Ottawa Senators, Adjunct Research Professor, School of Architecture, Carleton University, Chair, Hickling Capital Corporation

In 1955, when I was a small boy, I remember the day my grandfather, Sam Torontow, got his first car- a Chevy.

Sam and his wife, Anne, had come to this country in 1913 from a small Russian village outside of Kiev. They raised their three little daughters in a three bedroom apartment above the hardware store they ran on old St. Patrick’s Street in lowertown Ottawa.

My grandfather told me: “Can you believe that a poor Russian can own a car like this!” He loved Canada- he was always a Canadian first.

My grandfather’s Chevy came out of its garage only on Sunday afternoons; he would polish it and then take the family for an outing, usually in the Gatineau Hills. That car never saw a snowy day.

He believed that Canada represented a concept- civil order, courtesy, sharing and caring, opportunity for all.

In 1967, on my first day at McGillUniversity’s Faculty of Engineering, our Dean said to the gathered first year students: “Look to your left and look to your right, by Christmas, one of you won’t be here.” He was reminding us that, while Canada is a land of opportunity, it is also part of an intensely competitive world where effort, focus and ability are also needed for success.

We are seeing enormous changes in the global economy- the most fundamental shift since the industrial revolution is taking place right now. Human capital- brains and education- is now the most important resource that any country has.

There can be no doubt that Canada has these resources in abundance and that we are moving in a direction that recognizes this. Nowhere in Canada is this more true than in the New City of Ottawa.

In calendar year 2000, technology employment will overtake federal government employment as the largest sector in Ottawa. This is a future shaping event that has already changed our community in fundamental ways.

We are seeing that it is possible to live and work in the New City of Ottawa and do world class things from here. Jim Durrell, former Mayor of Ottawa, told me that when we brought back the Ottawa Senators in December 1990, a team that had not played a game in the National Hockey League in over 58 years, it was the biggest thing that had happened to our old logging town, Bytown, since Queen Victoria had named Ottawa the capital of Canada.

In a way, Jim was right- the Ottawa Senators represent the new Ottawa- young, dynamic, world class, unafraid of competing with the best of the best.

Commentators in Ottawa and elsewhere often talk about Ottawa as a ‘small market’- let me tell you, Ottawa is not a small market for hockey. You would rather own the Senators in Ottawa than many teams in the U.S.

Last year, Ottawa edged out Calgary for top spot in Canada in terms of job growth- 5% versus 4% job growth in Calgary. The Kanata area alone can expect to see as many as 10,000 new jobs created there in the next three years.

There will be close to 800,000 people living in the New City of Ottawa when it is officially formed at the end of this year from the amalgamation of the 11 municipal and township governments together with the Regional Municipality of Ottawa-Carleton. When the Outaouais (including Hull, Aylmer and Gatineau) is included, the National Capital Region’s population swells to 1,009,000. And within a one hour driving radius, there are 1.7 million people with the highest average family income in Canada at over $64,000. This is one of the best kept secrets in Canada; hardly anyone knows just how big the area has become and how much influence Ottawa has on a world stage in many areas not least of which is that we have become the global leader in IP (internet protocol) technology. Even people living here all their lives do not understand the changes taking place in their community. It may not be too bold to predict that the population of the greater Ottawa area may pass the Vancouver metropolitan area before 2020; Ottawa has the momentum and it has the space.

Tampa’s population, by comparison, is just over two million with an average family income of just $28,000 US. And there are far more hockey fans in Ottawa than there are in Tampa.

When a city reaches the one million population mark, an interesting transformation takes place- economic growth becomes self sustaining and new opportunities and new options present themselves.

One of the things we need to do a better job of, is convincing our educated young people, who are our greatest resource, that they can stay in Ottawa and do great things here. It certainly does not hurt that five young men in Ottawa recently built a company called Extreme Packet Devices in under two years and sold it a few weeks ago for $600 million US. There are so many examples of this kind that we can point to now and it is our most important marketing job- to market Ottawa to young Ottawans.

It has always bothered me to drive the Queensway east bound from my home in Kanata and to see a sign: “Ottawa, Population 304,000”. No wonder the media, visitors to our city and our own residents think of Ottawa as small and weak; it is a misleading impression and a damaging one as well. The New Mayor of the New City of Ottawa should make it a priority to take down these signs and erect new signage at all major ingress and egress points to the City and inside the City’s boundaries as well as to show the true facts- “Canada’s Capital City, Population 1,009,000”.

Two years ago, a huge proportion of our graduating class in the School of Architecture at CarletonUniversity, where I teach part-time, found employment in the U.S. This is repeated over and over again throughout the Faculty of Engineering to which the School belongs. It is a serious national challenge, which we must face up to.

Today, what we need to sell to young people is opportunity: access to venture capital and stock option plans, quality lifestyles, lower cost of living and housing, lower cost of doing business, the socializing of risk (Canadian medicare and support for public education come to mind) and an absence of social disorder and lower crime rates. Some commentators view medical care as a cost while, in fact, it is an investment in human capital. Healthy people and a healthy economy go hand in hand.

The future global economy will, in my mind, depend on highly dynamic city-states for economic growth; it will be a return to highly self-reliant urban agglomerations reminiscent of ancient Athens and Sparta or renaissance Florence, Venice and Genoa.

Glen Shortliffe’s report on amalgamating this region into the New City of Ottawa reflects this trend. Hopefully, the New City will also allow us to keep the wonderful diversity of this region- the rural lifestyle of West-Carleton just 30 minutes from downtown, the french fact of Vanier, the quaintness of the Village of Rockcliffe Park and so on.

But there is more that we can do to make our city-state pre-eminent in Canada.

We need to convince the new national junior stock exchange, the CDNX, to open an office in Ottawa so that our entrepreneurs can obtain faster and easier access to capital markets at an early stage of their development.

My eldest daughter, Rachel, will be entering Grade 8 next year and her fervent wish is to attend the CanterburyHigh School for the Arts. Canterbury, for those of you who have had the chance to visit, is a supercharged place where students take on a normal course load and they do an additional hour or two each day in an area of their choice- dance, music, theatre, visual arts. There is no vandalism at Canterbury. A visit there is a stark contrast to some of our other high schools where any disaffected young person can obtain any type of illegal drug within an hour.

Why should we not have more Canterburys?

Why not have a High School for the Technological Arts- where our young people can study multi media, internet protocol, web site design, fibre optics, computer networking, micro-electronics and software arts? I would guess that such a school would attract thousands of highly energetic and committed young applicants. Let us not underestimate the power of our teenagers- afterall, Einstein did some of his best work as a teenager.

Sweden recently announced a national program to make broadband access available everywhere in that country and available to all. This type of initiative is as imperative to our nation as electrification was in the early part and middle of the 20th Century.

Ottawa has the highest penetration of internet users in Canada (at 40%)- we should pressure BellCanada and Rogers to wire up every street in the New City of Ottawa for broadband communications. And, while we are at it, let us hope that the New Mayor of the New City of Ottawa can prevail upon Bell to make the entire National Capital Region a local call- no more long distance to Barrhaven, please.

Let us make a commitment in Ottawa to being at the leading edge in technology, education, the environment and government services. The New Mayor should commit to having the majority of municipal government services available on the net by 2002. Citizens should be able to pay their property tax bills, get a dog license, obtain a building permit, apply for a zoning change- all of it on line.

Flying over Ottawa on a summer’s day, one is struck by the amount of green space and the number of trees inside and outside the City. The New City of Ottawa should make a commitment to plant 1,009,000 new trees (one for each resident of the National Capital Region) on public rights-of-way before the end of the year 2010, as a way of affirming our continuing commitment to the environment. History has shown that every country that has become deforested has also become impoverished.

When I was seven, I rode Ottawa’s streetcars for a nickel. My friends and I went to the now defunct Rideau Theatre- 5 cents each way for the streetcar, 10 cents for the film, 10 cents for a candy bar (my favourite was Crispy Crunch) and 10 cents to phone home if trouble came our way. One of the biggest planning errors we made, was to rip out our streetcars and our downtown rail station, Union Station, largely to be replaced by the private automobile. This disenfranchised children and made car ownership a pre-requisite for first class citizenship. This needs to be re-examined- the mandate and mission of OCTranspo needs to be rethought. One must not underestimate the importance of Toronto’s streetcars, subways and Go Trains in making that city-state the powerful player it is on the world stage.

We need to be more accepting of and take steps to address the question of mixing together different economic classes and different land uses. Another daughter of mine, Jessica, is a huge fan of the Archie comic books and she can not imagine anything better than living in imaginary Riverdale with Archie and Veronica and Betty. If you ask her why, it is because, in Riverdale, these kids can live next to the Pizza Pit. In KanataLakes where I live, this would not be permitted- it is 1.6 kilometres to the nearest shop. We need to find a way to build an affordable and mixed use city, one that works for all.

We should follow policies that allow families to stay together by permitting the construction of in-home apartments or ‘granny flats’ in the rear yard. Why should we force the elderly to live in high-rise warehouses, in a ghetto where everyone else is elderly? It is expensive and de-humanizing.

We should continue to build communities that provide a wide range of housing and transportation alternatives and we should support our public institutions with adequate funding for public schools and medical care. We have not embraced in Canada the concept of gated communities with their private provision of ‘public services’ by quasi private governments (Home Owner Associations); some 80% of new subdivision housing in the U.S. is being built there in the form of gated communities, thereby dividing U.S. society into haves and have-nots. Clearly, this is a grave challenge to social cohesiveness in the Republic to the south of us.

We can set the stage for further growth but it will be up to individuals to make the future happen- individuals count. A few months ago, a friend of mine, Ram Kumar Sharma (not his real name) originally from the Punjab, came to me for advice. Since his arrival in Canada, he has been working in the parking garage of a large hotel. He is married with four small children and a wife that works inside the home. He has sponsored his entire family including two of his brothers-in-law who are now with him in Ottawa. He is currently on duty from 6:30 am to 4:30 pm and again from 7:00 pm until the garage closes at midnight.

Ram is also a huge hockey fan and that is one of our common interests. He enjoys playing Pro Line, an Ontario Lottery Corporation sports betting business. Ram is ambitious, incredibly hard working, a good family man and he has a ‘good heart’; he is generous to a fault. A few months ago, he decided to use his skills in picking winners a little differently. He borrowed $5,000 on his credit card, obtained a margin account with a discount broker and, subsequently, bought $10,000 worth of  stock in a company that he had studied intensively … the company that he chose is now called JDS Uniphase and Ram’s investment account is now worth $187,000.

Ram is buying today a food concession business and I am sure that if we check back with him in five years, we will see a very successful person.

Ram represents entrepreneurs as I have known them- calculated risk takers, ambitious, unafraid, optimistic; they never take ‘no’ for an answer.

When entrepreneurs fail, they start again. They learn from their failures; they gain experience and that sets the stage for future successes.

Canadians can learn from the American tolerance for failure; they successfully recycle the most precious resource- human capital. We know that one of the purposes of the bankruptcy act is to protect creditors but we must also learn that a second purpose is to give entrepreneurs another chance.

The flexibility of the U.S. economy (from the efficient allocation of capital to new, innovative and highly productive sectors of their economy to the fast recycling of workers and entrepreneurs from failed or slow growing parts of the economy to fast moving sectors) is a huge part of their success.

The Americans are early adopters of technology and none is more earth shattering than their embrace of the internet. The internet is eating an enormous hole in the world’s economy.

It does not matter how little someone is paid in the third world, the internet can do it faster and cheaper.

The internet is all about automation.

That means that you do not take your existing business model and ‘put it on the net’ and expect success. That is why I have my doubts that re-runs of “I Love Lucy” on the net is where it is at. Putting Time Warner content on AOL is not, in my view, what that merger was all about. It is AOL needing access to Time Warner’s cable systems and their large pipes into the homes of America that drove that merger.

I have my doubts about e-commerce too, at least the type of e-commerce represented by the book selling business model.

The internet is all about automation.

That means that downloading music from the net makes sense but placing an e-commerce order for an book on a UPS truck, followed by a UPS plane, then another UPS truck just to get it to your front door to find that you are not home, that does not sound like a revolutionary technology to me.

But does offer some truly astounding advantages to the user- their use of a relational data base means that their web site can prompt you with titles of other books that other people are buying who bought the one you were initially interested in. Because they have millions of customers, this is a powerful short cut for researchers and one of the reasons I use It also obviously helps sell more product.

When IBM or others finally perfect e-paper then the model for book selling will have truly arrived.

The internet is all about automation.

Let me give you another example. We have a number of home builders in the audience today and I am proud to say that I live in a fine home built by one of those companies for my family and I in KanataLakes.

Today, with all due respect, the home building business is still a craft based endeavour which, if it were compared to the computer industry, would still produce five function calculators that look like primitive World War II vintage Turing machines (used for breaking Japanese and German codes)- big, clunky and expensive.

Ultimately, a home builder’s web site will allow consumers to ‘goggle’ in to the site in three dimensions, to choose the model that they want, the lot that they want and then to load up their shopping carts with the features they desire. As they make changes to their design and add and subtract amenities, the calculator will tally and show them their costs.

Visa and Mastercard are moving upstream- their credit cards will be used for everything including buying a new car or buying a home. There is a small but fast growing market for power cards that carry credit limits in the hundreds of thousands of dollars.

But this home buying e-commerce transaction using a credit card is only the tip of the iceberg. In all probability, it is the e-business applications that will have the most dramatic impacts on home building. Pre-authorized suppliers and sub-trades will log on to the builder’s web site to estimate the volume of work required and to bid on it. Scheduling, based on just-in-time delivery, will be net based. Payments will flow business to business via e-payments. Municipal inspectors will log on to see when they are required for inspections. Municipalities will recognize that home builders are their clients. The number of separate subcontractors and trades will fall from 25 or 30 today to just 6 or 7.

If former Russian President, Boris Yeltsin in his early days as a construction boss in Sverdlovsk (1,000 miles east of Moscow) could build five storey, wood frame apartment buildings in five days (albeit with a huge crew), surely we can learn to build houses in 30 days or less at higher levels of quality, with fewer defects, higher margins for the industry and lower prices for consumers.

The home builder will become a web site operator. Legal closings, land registry documentation, mortgage financings … all will be web enabled.

I remember Don Holtby, then general manager for CFRA, a local Ottawa radio station, telling me that he was so excited about the return of the Sens, that he had the station rig up a dedicated land line so that he could hear the play-by-play from his condo in Florida on October 6, 1992. He felt that the $270 U.S. cost for the three hour broadcast was well worth it (Ottawa won, by the way, 5 to 3 over the Montreal Canadiens).

Today, Don would log on to with his laptop and listen to the live play-by-play using a local line- the marginal cost to Chum Limited would be zero.

Old-line industries are going through incredible re-engineering.

A national advertiser who wanted to launch a national billboard advertising campaign just three years ago went through a six to twelve month process. They drew up a campaign theme, got the creative done by an agency, had the agency contract billboard locations with up to 25 regional billboard companies, sent the artwork out to all of them by courier, received back the proofs from all 25 for approval, made the necessary changes to get consistency in the artwork, sent them back, checked them again, signed off finally. The images were then often hand painted on huge strips and, at last, a crew went on site and glued them to the board.

Today, billboard companies put their inventory of available billboard locations on their web sites and agencies can book and pay for that inventory on line. Agencies then can download their artwork over high speed lines and, as billboard companies merge and become national and as they move towards replacing conventional billboards with high definition video boards, an agency can place a national campaign in a matter of hours or days. It does not matter how little a third world labourer is paid, the web can do it faster and cheaper.

That means that the entire global economy has to move up the food chain- and the only way to do this is to invest in education, medical care and social order, which happen to have been Canada’s priorities for the last 50 years. We have it right, now we just need to execute.

Copyright Dr Bruce M Firestone, Ottawa, Canada, March 2000

Bruce M Firestone, B Eng (Civil), M Eng-Sci, PhD

Century 21 Explorer Realty Inc Broker | Ottawa Senators Founder

613.422.6757 x 250

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About the Author

Bruce is an entrepreneur/real estate broker/developer/coach/urban guru/keynote speaker/Sens founder/novelist/columnist/peerless husband/dad.