1. 1 THE NEW ECONOMY: ALIVE AND KICKING! In Sweden and California Klas Eklund, SEB November 7, 2000

2. 2 THE “NEW ECONOMY” - 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

3. 3 EXCELLENT 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

4. 4 AND 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

5. 5 FINANCIAL 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

6. 6 HIGH P/E RATIOS S&P Composite Index 0 5 10 15 20 25 30 35 40 45 1880189019001910192019301940195019601970198019902000

7. 7 INCREASING VOLATILITY Standard deviation, Stockholm Stock Exchange

8. 8 CONCLUSION: THE NEW ECONOMY IS ALIVE 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

9. 9 3 3 17 DEATH OF PIONEERS 5,000 railway companies 2,000 car producers

10. 10 2000 EUROPEAN E-COMMERCE GROWTH USD bn Source: Forrester report 1999 1,600

11. 11 …BUT E-COMMERCE MUST 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...

12. 12 B-BUSINESS PARTNER NETWORK

13. 13 “THE REVENGE OF THE BRICKS” …not least in Sweden

14. 14 “THE MOST WIRED AND WIRELESS NATION IN EUROPE”

15. 15 BUT THE SWEDISH SUCCESS WILL NOT NECESSARILY 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

16. 16 IMPRESSIONS FROM CALIFORNIA 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

17. 17 BACK TO THE FUTURE

18. 18 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

19. 19 INTEREST 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

20. 20 FINAL 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.