Tuesday, July 10, 2007

Party Mood in Sweden?

The FT today:

Party mood in Sweden tempered by experience

Sweden is partying like it is 1999. Presented in its unvarnished form, the economy is forecast to grow by 3.6 per cent in 2007, but this statistic fails to capture the pure, unmitigated exuberance of it all.

For this, less dismal economic indicators are required, and there are worse places to start than with sales of champagne. In these terms, Sweden is having a ball. According to Systembolaget, the country’s alcohol monopoly, Swedes have never consumed as much champagne as they did in 2006. The previous record year was 1999, during the internet boom.

There are other signs that Sweden has shrugged off the collapse of the internet bubble. The stock market has passed its internet-fuelled high set in March 2000. House prices keep rising. Perhaps more tellingly, Sweden has the ultimate boom market indicator – a juicy insider dealing scandal, complete with tales of a trader stuffing the baby seat in his car with SKr9m ($1.3m, €1m, £700,000) in illicitly earned cash. Rigid economic analysis this certainly is not, but if the market has passed its internet peak, champagne sales are at records and babies are carried around Stockholm like Chinese emperors on cushions of cash, it is fair to conclude that a boom is under way.

The fascination of this boom lies not in its similarities with 1999 but with its differences. This time around there is excessive consumption – but it has been tempered by experience, the full measure of which can only be realised by journeying backwards to 1999 to make a comparison.

They were heady days. Wired magazine, the internet bible at the time, named Stockholm the world’s second best location for IT after Silicon Valley. Roger Björkholmen, a gallery owner, recalls one party that carried on through one night before helicopters landed to take guests to a Japanese spa outside Stockholm for some pampering, then flew them back into town for another night of excess.

Gunnar Fröroth, co-founder of Diplomat PR, says he knew a collapse was coming after he attended a launch party thrown by Home4You, an online furniture company, with a painted backdrop of the palace of Versailles, actors in 18th century dress and fake royal gardens made of Astroturf, over which scampered live rabbits. Borrowed money and huge burn rates were the order of the day – as was spending paper gains on cars, apartments and trophy paintings. Niclas Fröberg, the former chief executive of G Life, an upper crust online lifestyle magazine, said: “It was all made so much easier as a result of the fact that it was other people’s money.”

Today, however, it is a different story. Lukas Göthman, one of Sweden’s most successful artists, says he can today sell an entire collection in half an hour – the same as in 1999. “But they know what they are buying this time,” he says.

“There is more sophistication, more wisdom.” It is certainly not unique to Sweden that the internet boom and bust provided a profound learning experience for the young entrepreneurs of the time. It was a lesson that introduced first-timers to the concept of an economic cycle.

The boom this time around is just as pronounced in terms of its ability to create wealth, but it is has a traditional Swedish air of restraint, moderation and maturity.

Carl-Emil Erikson, a top interior decorator, echoes this view, saying his clients are demonstrating something they lacked in 1999: “Taste”. He links this to the fact that they are more often than not spending their own money rather than other people’s.

This is not to say that the champagne bars of Stureplan – a crossroads in the centre of Stockholm surrounded by bars and restaurants – do not see their fair share of 1999-like deeply conspicuous consumption. But consider the thoughts of Johan Kristiansson, the youthful chief executive of Starbreeze, an internet gaming company, who worked as a venture capitalist in 1999.

“In 1999 the focus was all on marketing, getting your name in the paper. Press clippings were an important as a way of creating value for a company. But the years after the crash made me a cheap bastard. I learned lessons about what sort of expectations I should have. I learned patience, that things take time and you need to hold on to every penny you have.”

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