Sweden, a hotbed of awesome technology – Part II

With a population of only 9.8 million, which is less than half of Lagos City, Nigeria – using New York Times figures, Sweden is one of the hottest tech hubs on the planet. Five companies exemplify this surge: Spotify, Mojang, Skype, Klarna, and King. These “unicorns” – the name given to start-ups worth more than […]

With a population of only 9.8 million, which is less than half of Lagos City, Nigeria – using New York Times figures, Sweden is one of the hottest tech hubs on the planet. Five companies exemplify this surge: Spotify, Mojang, Skype, Klarna, and King. These “unicorns” – the name given to start-ups worth more than a billion dollars – have all come out of this little Nordic country and inspired a new generation of entrepreneurs who now dream of achieving worldwide success.
A few bits on these unicorns, taken from the 26 April 2016 issue of Telegraph, are in order. Spotify, the world’s top music-streaming service was launched in 2008. Today it has 75 million users in 58 countries. In June 2015, Spotify raised $526 million, bringing its valuation to $8.53 billion. Mojang, a video game developer, was founded in 2009. It developed Minecraft, one of the world’s best-selling games. Microsoft bought Mojang for $2.5 billion. Skype was co-founded (with Estonian programmer Jaan Tallinn) by Swedish entrepreneur Niklas Zennström, as an online voice call and video chat service. Microsoft now owns Skype. Klarna was developed by three students who teamed up in Stockholm in 2005 to start this online payment service now worth $2.25 billion. With 35 million users, Klarna differentiates itself from PayPal and similar services by debiting payments from a buyer’s account only after the goods have been delivered. The video-game company King was founded in 2003. It has created more than 200 games, including Candy Crush Saga, Farm Heroes Saga and Pet Rescue Saga. King now has 475 million unique monthly users. The firm is listed on the New York Stock Exchange with a market capitalization of $5.5 billion.
So, why has Sweden been able to pull it off when most countries appear to be clueless? A few factors can be identified. Consistent with the country’s socialist philosophy, coupled with a fairly long tradition of innovation which is helped by a quality educational system, with strong engineering programs, Sweden subsidized individual ownership of PCs. This promoted computer literacy, and today over 90 percent of the population is computer literate. One founder of a successful high tech company attributes his success to the PC subsidy, stating that his family would not have been able to afford one on its own!
In the 2000s, the city of Stockholm, which houses a disproportionate number of the successful tech companies in Sweden, funded an elaborate fiber-optic network project, in a model that is reminiscent of South Korea. Also, as in South Korea: the love of technology and early-adopter mindset have turned Sweden into a testing lab for high tech products; a situation that major international companies exploit.
Sweden also has a track record of successful companies – Volvo, Ikea, and others, allowing the country to exploit the “success breads more success” mantra. Furthermore, being small, the country has to globalize in order to find markets for its innovation. To boot, a large number of swedes (86 percent) speak English. The realization of the need for a small country to set itself apart from international competition has also been at the crux of Sweden’s tech development. Sweden spends 3.3 per cent of its GDP on research and development, compared to an average of 2.3 per cent for all OECD member countries. (OECD stands for Organization for Economic Co-operation and Development, which comprises of 34 mostly-developed countries from Europe, America, and Australia. Japan and South Korea are the only two Asian member countries; Mexico, Chile, and Israel are also members.)
A pertinent question to ask is whether or not Sweden can eventually catch up to the master – the United States. I don’t think it will happen given the current socialist atmosphere in Sweden! In Sweden, bankruptcy of a company stays in the records of all the board members and the CEO for life, thereby making it difficult for the persons to qualify for new loans to try out new things. This policy discourages risk-taking, which is the hallmark of a culture of innovation. Also, the socialist ideology will probably clash with entrepreneurship, which seems to be synonymous with capitalism. The liberal, government policy-aided scenarios: long vacations, paternity-leave for men, and   stuff like that, are going to undermine the tech lot of Sweden. Already, for related reasons, women are not doing as well in tech jobs when compared to capitalistic America. (“No women freeze their eggs in Sweden!”) Also, taxes are astronomically high – so the government can support its social programs. Finally, meritocracy, which is so much espoused by western-style management gurus of the caliber of Jack Welch, former CEO of General Electric, appears to be negatively looked upon in Sweden, in favor of equity in compensation. For Sweden, there might not be a choice. That is, it’s either capitalism or socialism!
So, bright kids in Sweden might just excel at initiating great innovations that eventually end up being taken over by capitalist American companies! It’s that simple. Sorry, Ek, I wish I could say it differently.