Wednesday, November 23, 2011

Håkan Juholt talks innovation

Reading an interview in today's issue of Ny Teknik, with Håkan Juholt, the leader of the social democrats in Sweden. On the question on how to make Sweden a leading technology country, Håkan says:
"We need close cooperation between the state and companies. Where would Ericsson have been without Televerket?" (Televerket = the old telephone monopoly in Sweden.) 
Oh, golly.

I wonder if it's just good old companies like Ericsson that should work closely with the state. What about Spotify? And Tripbirds, maybe we can work closely with the state, too. That would be great for innovation. right?

It's worth noting that Ericsson has the same stock price today as it did in november 1995. Not counting inflation. During the same period the stock index has gone up more than 300%.

I don't mean to bash Ericsson. But maybe closer ties between Ericsson and the state isn't the way forward if we want to be an innovative country in the years to come.

In Håkan's defense he says he'd like to shut down a state-owned venture capital fund, with three billion sek in capital, that the center-right ruling coalition set up in 2009 to invest money in the automotive industry. The reason? "It was a fiasco, and it hasn't worked". Sounds reasonable. Håkan's solution? A new state fund investing in other industries. Hmm...

As an alternative solution to politicians of all colors: Stay out of the market, and let entrepreneurs take care of innovation. But do all you can to make the market machinery work. Like fixing this. Get it?


UPDATE 29/11 2011: 6 days later, the tax authorites removed the double taxation on apps. Way to go!


Anonymous said...

I really don't like Juholt, but in this odd case, he seems to be more knowledgable than you, Ted. I do have a lot of respect for you however, Ted.

But you simplify too much, and tend to be too biassed by your own type of 24hr business camp of business. In *addition* to these and other more light and web oriented companies, we have to innovate stuff that requires much more in terms of efforts and research. In those cases it may be quite beneficial to find models of co-operation between *any kind of buyer* and a vendor to find a better and more innovative solution. In the case of Televerket and LM Ericsson, that was the case for telephony. But there are countless other similar situations with both governments and private larger corporations doing the same.

In fact, some of the countries we see as the most market oriented have had a long history of this. In both Israel and the US, the military (and space in the US) has acted in a catalytic way to spur advanced developments that never would have come out of venture capital and even less so from mortgaging your home.

So, it would be really beneficial if the government would use its money to stimulate innovations rather than pour them down the drain to numb fake private companies like Carema or inefficient institutions alike.


Anonymous said...

What does the stock price of inflated values of Spotify and other really matter. We are coming all the more aware of how hollow the Wall Street style economy is to the society. How much is Ericsson contributing to the society and its employees compared to Spotify with a mere 100+ something employees.

Stock prices, Ted, come on! Tune in to #OWS a bit.


Ted Valentin said...

@Gustaf Rosell (Anonymous). It's not a choice between spending the money on "state-lead" innovation OR on Carema.

It's a choice to spend it on this or on something else, something better (or not at all). There are many, many things you can spend tax payer money on.

And everyone want's the state to invest in THEIR industry. It would be easy for me to argue that spending it on startups would be the best. Hey, spend it on Tripbirds, so we can kick back and relax :)

Sure, you can say that there is innovation coming out of military spending. But you will have to convince me that the money is better spent there than if the same amounts would have been allocated by "the market". Please bring proof, from modern times.

You also have to problems that arise when the state "takes sides", and decides to work with Ericsson and ASEA. Why those? Then why not Spotify, or even Tripbirds? Can you see where that argument is going...?

The state shouldn't take sides with specific companies. And Ericsson and ASEA already have a RnD budget, so why should they?

Juholts arguments are from the industrial age. From the sixties. Time to move on.

Gustaf Rosell said...

My key argument is that we are already spending government money on a lot of things, so why not spend it on things that lead to innovation rather than income re-distribution along the ways we are seeing in the ongoing privatization sprees.

I don't think Ericsson would be the company to spend on either. But once upon a time, they were a startup as well.

There are efforts driven by IVA and Vinnova for innovation driven tenders, and that might be one way to go, if it s not being made too bureaucratic while still being transparent.

In terms of good examples, I would count a major part of of the startup community in Israel. A lot of the more research oriented companies coming from places like Karolinska Institutet are other examples. It's not either or. We have to do both and evaluate often and being open on the effects. Or pivot, if you follow the lean startup mantra...

(I also think that we will have to find fixes for the lack of true venture capital which might involve more direct government capital, but it's clearly not an ideal situation.)

This is a subject that needs a bit more time and space for discussion...

Kalle E said...

I totally agree with you, partially. =)

The real problem starts when the state is the buyer. How will the government decide which private company is should cooperate with?

How will the government decide which technology it should focus on?

Are we going to do it through government procurement processes as “Offentlig upphandling”. Then the process won’t benefit the smaller, privately held companies – only giant public ones.

The Ericsson case would not be a possibility in Sweden today. Whichever technical solution the state decides on, there are many actors to choose from in any industry of today.

As an example we can look at digital TV. How many of you know that Boxer is a private company held 100% by…

…wait for it…

… the Swedish Government?

Is that innovation?

Ted Valentin said...

@Kalle E. I had no idea that Boxer was a state company. Fascinating!

@Gustaf Rosell. I think it's great if the government promotes innovation. But not by partnering with Ericsson, or some other, specific, firm.

What they should strive for is promoting a functioning ecosystem. Making the market work - not interfering with the market. Not taking sides in the market.

Mike Butcher of TechCrunch just pinged me with the story of VC in Israel. What the state did there was to give tax incentives to foreign VC investments, and doubling any of their investments with funds from the government.

That might be a way to go about it, without picking sides.

Spending money on higher education, and research, is another obvious one. But I think we're already doing that.

Removing stupid things like double taxation on apps is a simple one.

Making it more tax-friendly for serial entrepreneurs to do reinvestments also seems to be an issue.

BUT I think we all agree that Juholt's solution, with state owned companies, state owned startups, and state-led partnerships is NOT the way to go.

Max Valentin said...

I red the article and hear traditional Social democratic values to have hybrid investments strategies does not upset me very much and as someone else wrote it is a common practice.

A more resent example is the German investments in renewable energy sources during the 90's. It did not end up they way they though - German domination in the whole value chaine of solar panel production. Most of the production is in China but Germany makes the machines that make solarpanels. The strategic public investien did probably pay off.

What worries me more in his article is that he wants to subsidise management consultants by giving that service for free. My personal experience of ALMI (who probably would carry this out) is really bad. Plus it kills lots of potentiality in the service innovations sector.

(but why discuss domestic politics in english?)

Ted Valentin said...

@Max Valentin: As I mentioned in the comments we got som good feedback from Mike Butcher at TechCrunch UK, about how this works in Isreal, for example. International competition through innovation isn't something that just concerns Sweden.

And that politicians haven't understood how innovation works in the past is no excuse for remaining incompetent. Real innovation usually isn't done by the big companies.

Here are the ten fastest growing tech companies in Sweden (according to NyTeknik).


It's the growth of companies like these you should stimulate, if anything.

Not Ericsson and ASEA.