Sinking in Scandal: A Canadian Tragedy

As Canada's most valuable company, Nortel entered the 2000s with a boom. It would not survive the next decade. Part 2 of 2.

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People to thank:
Subtitles provided by @redslendy
Charlie Arsenault – Assistant Editor
@ThePlainBagel on Youtube for providing me with Nortel’s stock price data
@ChrisHanel on Youtube for extensive Blender Geometry Nodes assistance
@hotcyder on Youtube for the thumbnail

Additional imagery licensed from Getty.
Music from the Youtube Audio Library and Epidemic Sound.
Additional music from @REPULSIVE and @WhitebatAudio
3D boat models are Royalty free assets:

A note on interviews: I spoke to over a dozen former Nortel employees for this series and those conversations provided many insights you'll hear throughout. Because some of the interviewees still work in the industry I have kept all names anonymous. If there is a direct quote with a name attached it's because it was a quote said publicly.

Sources:
The Bubble and the Bear – How Nortel Burst the Canadian Dream by Douglas Hunter (2002)
Nortel Networks – How Innovation Created a Network Giant by Larry MacDonald (2000)
No Fear: Tales of a Change Agent or Why I couldn’t Fix Nortel Networks by Tim Dempsey (2014)
Silicon Valley North: A High Tech Cluster of Innovation and Entrepreneurship edited by Larisa V. Shavina (2004)
Knights of the New Technology by David Thomas (1983)
Adventures in Innovation: Inside the Rise and Fall of Nortel by John F. Tyson (2014)
The Master Switch: The Rise and Fall of Information Empires by Tim Wu (2011)
100 Days: The Rush to Judgement That Killed Nortel by James Bagnall (2013)
For $ale to the Highest Bidder: Telecom Policy in Canada edited by Marita Moll and Leslie Regan Shade (2008)
The Invisible Empire: A History of the Telecommunications Industry in Canada, 1846-1956 by Jean-Guy Rens (2001)
The Avro Arrow: For the Record by Palmiro Campagna (2019)
The Deal of the Century: The Breakup of AT&T by Steve Coll (1986)
Asleep at the Switch: The Political Economy of Federal Research and Development Policy since 1960 by Bruce Smardon (2014)
Canadian Science, Technology and Innovation Policy by G. Bruce Doern, David Castle and Peter W.B. Phillips (2016)
Reconcilable Differences: A History of Canada-US Relations by Stephen Azzi (2015)
Pa Bell: The Meteoric Rise of Bell Canada Enterprises by Lawrence Surtees (1992)
Random Excess: The Wild Ride of Michael Cowpland and Corel by Ross Laver (1998)
TV Interview with John Roth on Market Watch on CNBC, October 1999
Royal Canadian Air Farce Episode from February 23rd 2001
The Rise and demise of Lucent Technologies by William Lazonick and Edward March (2010)
Brain Drain: Why do some post-secondary Graduates Choose to Work in the United States? By Brahim Bordarbat and Marie Connolly (2013)
An Overview of the Demise of Nortel Networks and Key Lessons Learned: Systemic effects in environment, resilience and black-cloud formation, University of Ottawa (2014)
Class, Nationality and the Roots of the Branch Plant Economy by Gordon Laxer (1986)
Foreign Ownership and Myths about Canadian Development by Gordon Laxer (1985)
Gale of “Creative Destruction” Engulfs Nortel by Sanjeev Kumar Sharma (2011)
Nortel Technology Lens: Analysis and Observations by Peter MacKinnon, Peter Chapman, Hussein Mouftah, University of Ottawa (2015)
Capital Gains Taxation in Canada 1972-2017: Evolution in a Federal Setting by Francois Vaillancourt and Anna Kerkhoff (2019)
The 2010 Federal Budget – A summary of the key tax measure that have a direct impact on you – RBC Wealth Management Services, March 4th, 2010
The Changing Structure of American Innovation: Some Cautionary Remarks for Economic Growth by Ashish Arora, Sharon Belenzon, Andrea Patacconi, and Jungkyu Suh (2019)
Do Tax Differences Cause the Brain Drain? By Don Wagner (2000)
The Branch Plant Economy by Stephen Clarkson (1972)

0:00 The Fitzgerald
3:08 Brain Drain
12:15 Mind the GAAP
22:00 A Good Problem to Have
37:12 Red Ink
44:05 What's Done is Dunn
57:53 Them's the Breaks
1:14:28 Cookie Jar Accounting

[officerjeremydewitte]

Brilliant parallel between Edmund Fitzgerald who was never the same after his ship sank, and John Roth who was completely unaffected after he sank his ship.

[drmonkeys]

"Nobody broke any rules". Damn that line hit so hard. There was no fraud, there was no corruption. It was just how the system worked.

[BluhBluhDuck]

Ultimately, the person most responsible, John Roth, escaped on a lifeboat while the others ended up sinking on the ship that was Nortel.

[melkore]

"No one broke the rules" is the takeaway. All of this, the CEO bonuses and the casual workers losing their life savings — is the system functioning as intended.

[rodneyote]

"Even the prestigous Bell Labs was embroiled in scandals, as one of its physicists was accused of faking dozens of Nobel-worthy research papers"

Ah yes, the Bobby Broccoli Cinematic Universe

[khafaniking]

This whole video is essentially just
“It’s over”
“It’s somehow even more over”
“It’s never been more over”
“Atomic levels of over”

[teddyboragina]

I'll never forget, working at mcdonalds as a teenager, reading the newspaper, thinking about the future, and debating investing in the stock market. Nortel was at or around $121 at the time, and I gave real serious thought about putting a few hundred in by somehow getting a few shares. I decided to not do so in the end, and by my next shift, the stock collapse had started.

[Lishadra]

1:26:12 “They wanna shake your hand and tell you how sorry they are, but they also want you to hate the game and not the player. I assure you: I’ve got more than enough energy to do both.” God that line resonates.

[malign]

“It’s a wonder there is any red ink left in Canada” goes UNBELIEVABLY hard

[atrioc]

This is a masterpiece man. Excellent financial journalism, explanations, visualizations. Among the very best on YouTube ever. Thanks for making.

[RedstarIsHere]

The sudden Summoning Salt reference at 11:40 absolutely killed me. Well done.

[sriramg]

As a San Jose Sharks fan, BobbyBroccoli videos were the one place I thought I would be safe from shame and riducule. Turns out I thought wrong

[kingcaique]

When he revealed how the people on long term disability were fucked, I just started crying. My dad has been on LTD for a while, and my family has been extremely fortunate in our savings, but for the people who need that it’s so important. I just really feel for them

[kaaaputnik]

Using Edmund Fitzgerald Sr.'s reaction at the beginning to contrast John Roth's callousness is such a gut-wrenchingly effective dramatic device - the realisation was so horrifying when the penny finally dropped for me...

[mrhoneycutter]

It always disgusts me when executives pay out their own bonuses instead of providing for their employees, especially when they claim “we can’t do it”, as if that 190M in bonuses wouldn’t have help lessen their employee’s pain in severance. Especially when considering that they’ve been receiving 20-30M in bonuses each year up to that point.

[OISHIROSE]

John Roth gets to basically forget whatever happened with Nortel and brush it off as 'ancient history' and that's because it didn't affect him at all- he walked away with his millions and is living his dream life. On the other hand thousands of ex-employees' pensions and compensations were erased, and their (+families') lives were altered for the worse, probably forever for some. I know this is what always happens, but hearing that Roth 'seemed puzzled why people are still interested in this' made my blood boil.

[dangalfthedruid]

It never even occurred to these men to *voluntarily* donate even a portion of their golden parachutes to their laid off employees. It might even have been a useful PR boost, for Nortel and the government both. The idea of surrendering their "right", what they were "legally entitled to", was baffling to them. What empty hearts that speaks to.

[darkspells]

1:26:15 - "... they want you to hate the game, not the player. I assure you, I've got more than enough energy for both."
This line hit me hard. I love it.

[malka]

"it's ancient history" I love how he either does not care or does not fathom that people are to this day suffering because of what happened.

[tylerr]

Statements like "44 billion dollars is just gone" is insane to me: that 44 billion never existed, it was as sepculation, a dream a bunch of suits in highrises thought up as they promised a bunch of really talented, hard working engineers and scientists a salary those executives knew they couldnt deliver. Sickening, downright vile, and this stuff happens all the times.