Download - 1 THE NEW ECONOMY: ALIVE AND KICKING! In Sweden and California Klas Eklund, SEB November 7, 2000
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THE NEW ECONOMY: THE NEW ECONOMY: ALIVE AND KICKING!ALIVE AND KICKING!
In Sweden and In Sweden and CaliforniaCalifornia
Klas Eklund, SEBNovember 7, 2000
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THE “NEW ECONOMY”THE “NEW ECONOMY”- NOT ONLY IT- NOT ONLY IT
• Sounder macro policy– Stricter budget policy, independent central
banks
• Globalization & deregulation– More sectors open to international
competition
• IT revolution– A new generic technology, which cuts
transaction and information costs
• These three processes interact
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EXCELLENT RESULTSEXCELLENT RESULTS
• Stiff competition– deregulation, transparency
• Higher growth– Investments, productivity
• Low inflation– Sounder macro policies, deregulation,
cost-saving technology• Smaller cyclical swings
– Less stop-go, less political risk
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AND FURTHERMOREAND FURTHERMORE
• Globalization increases the standard of living
• …and promotes democracy in the world• Despite the “golden straight-jacket”• But creative destruction creates new
divisions• The economics of superstars are difficult
to handle for politicians• Challenges to old political parties and
interest groups
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FINANCIAL MARKETSFINANCIAL MARKETS
• Low, stable inflation and sounder macro policies give low government bond yields
• Flatter yield curves, where short end varies more - contrary to old rules
• Large inflows to stock markets• High short-term volatility due to
uncertain valuations, strong flows, e-trading and herd mentality
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HIGH P/E RATIOSHIGH P/E RATIOSS&P Composite IndexS&P Composite Index
0
5
10
15
20
25
30
35
40
45
1880
1890
1900
1910
1920
1930
1940
1950
1960
1970
1980
1990
2000
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INCREASING VOLATILITYINCREASING VOLATILITYStandard deviation, Stockholm Stock ExchangeStandard deviation, Stockholm Stock Exchange
0,0
0,5
1,0
1,5
2,0
2,5
3,0
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CONCLUSION:CONCLUSION:THE NEW ECONOMY IS ALIVE THE NEW ECONOMY IS ALIVE
AND KICKING!AND KICKING!• New economy is alive - visible in macro
performance, macro policies and financial markets
• The new economy is more than volatile stock markets, much more than bumpy ride of dot.com valuations
• Many more will go bust, but the new economy will still be there
• Compare: Railway stock crash, electricity and radio stocks in previous manias
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331717
DEATH OF PIONEERSDEATH OF PIONEERS
5,000railway
companies
5,000railway
companies
2,000car
producers
2,000car
producers
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2000
EUROPEAN EUROPEAN E-COMMERCE GROWTHE-COMMERCE GROWTH
USD bn
Source: Forrester report
1999
1,600
@
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……BUT E-COMMERCE BUT E-COMMERCE MUST LEARNMUST LEARN
• Abysmal CRM– crappy web sites, poor service
• Logistics!– Too much waiting
• Pricing models– How to get customers to pay– Burn rate
• Lack of management skills• Often the giants from the “old”
economy are better: IKEA, SEB...
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B-BUSINESS PARTNER B-BUSINESS PARTNER NETWORKNETWORK
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““THE REVENGE OF THE THE REVENGE OF THE BRICKS”BRICKS”
……not not least in least in SwedenSweden
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““THE MOST WIRED THE MOST WIRED AND WIRELESS NATION AND WIRELESS NATION
IN EUROPE”IN EUROPE”
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BUT THE SWEDISH SUCCESS BUT THE SWEDISH SUCCESS WILL NOT NECESSARILY WILL NOT NECESSARILY
LAST FOREVER….LAST FOREVER….
• Success now is built on macro U-turn, de-regulation and old engineering competence.
• It was not planned or anticipated• Threats: New technologies, taxes, lack of
talent and skilled labor• The window of opportunity can be closed
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IMPRESSIONS FROM IMPRESSIONS FROM CALIFORNIACALIFORNIA
• The poor cousin from the boondocks• Silicon Valley - still booming, but risks of
burn-out• San Diego - on the rise, especially bio-
tech and wireless• Los Angeles - smiling smugly• Venture Capital - still strong
– USD 30 bn in Silicon Valley Q3 99 - Q2 00• The wheat is sifted from the chaff• And B2C e-commerce is cold
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BACK TO THE FUTUREBACK TO THE FUTURE
Period Pre 95 95-99 2000+
Rules Grow Get big fast Get profit-able fast
Behavior Enthusiasts Golddiggers Risktakers
Liquidity 6 years 2 years 4 years
Value 300 mln 2 bn 800 mln
Market 1 mln 50 mln 100 mln
VC returns 30% 100% 40%
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WHAT IS REQUIRED?WHAT IS REQUIRED?
• A credible business plan• Extreme focus• One good idea - strong niche• Global outlook• Possibility to attain size• Lower burn rate• Management team• Attracts talent
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INTEREST IN SWEDENINTEREST IN SWEDEN
• Excellent reputation in wireless• Great testing ground, rapid diffusion• Under-tapped pool of talent• Impediments:
– Taxes– Lack of focus– Not big enough mindset?
• Conclusion: A risk (or promise?) that talent is lured away
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FINAL WORDSFINAL WORDS
• Many more dot.coms will die and venture capital will be more restrictive
• But the new economy is alive. It is visible in macro numbers and in financial markets.
• The new economy will move ahead - as technology develops and new business practices are embraced by old companies.