Hollow hopes - swallowed pride
What Guy Parmelin's wealth fund and the Mall of Switzerland have in common
Dear Insider,
Shopping is fun. 🛍
Most of the time…. Especially if the season is right and the prices are too.
But Swiss Federal Councilor Guy Parmelin - in charge of the Economic Department - doesn’t have permission to go on a spree - at least not yet.
If he did - he might be successful.
But another “shopping story” holds a lesson for the right-wing politician.
Read on to learn more…
Quick hits:
💸Waiting for Parmelin
Federal Councillor Guy Parmelin will have to wait. His ambitious plan to launch a CHF 500 m sovereign wealth fund to support younger companies did not manage to inspire enough of his parliamentary colleagues to move forward with the project in the Bern. The debate around such a government fund has festered for some time - with many feeling that a centrally-controlled entity would be to powerful.
🛍 Empty in Ebikon
It is the 2nd-largest shopping mall in Switzerland - and it is nearly empty. The Mall of Switzerland in Ebikon opened to great fanfare in the fall of 2017. Yet it continues to disappoint and may even have to close its doors.
💊Swallowing the opportunity
They are giants in their own right - but scared ones at that. Roche and Novartis, champions of the Swiss pharma industry seem to be losing out to their foreign competitors who are more courageous in making M&A deals to spur new growth. The old and mighty may become the old and broken.
💡The Point:
👉 On the surface, a state-backed venture capital fund seems to make sense. Switzerland is a small country with few VCs “in-house”. Its innovation is legendary and the potential of its highly-skilled college graduates largely untapped. But many in the highly-devolved Swiss society fear that giving the government in Bern too much “dry powder” would disrupt the balance of the economy and let it “pick winners and losers” by virtue of its size.
The debate over a sovereign-wealth fund began in 2021 - at which time the Swiss National Bank was sitting on a pile of cash. Since then the global market correction has wiped out a lot of the profits the SNB had to deploy. VC money probably won’t be coming from Bern any time soon.
👉A big mall in central Switzerland made a lot of sense - on paper. With tourist-rich Luzern not far away and a growing population in the surrounding area, the planners of the Mall of Switzerland had a solid argument. Then came corona. And even before the pandemic, many in Switzerland questioned whether the size of the mall actually made sense - given its energy consumption and doubts about the sustainability of such a mega-project. Consumerism in Switzerland is not in style.
👉 It is no secret that pharma is a long-term game. This makes fast, nimble growth spurts extremely difficult. Years of research, trials and go-to-market make the pill business very top-heavy. But there is a way to grow - acquisitions. Gobbling up smaller, innovative companies with their drugs makes both acquirer and acquired happy. So why have Roche, Novartis and other European giants not done more? Perhaps it is a cultural aspect. And maybe they have become too complacent in the face of record numbers during corona. The lazy ones usually fall by the wayside…
💡The Insider Advantage:
The struggle in Switzerland between big and small continues. Big government is frowned upon. Guy Parmelin may have had big ideas - and rightly so - but the “little man” still counts quite a lot in Switzerland. Here, a politician from the Swiss People’s Party (SVP) tried to do a “big, liberal, pro-business” thing - and ran into opposition. Some of his opponents are not villagers in the Alps, but the Swiss cantonal governments themselves who would rather see money flow into their coffers rather than be spent on progress.
They do Switzerland a disservice.
Where Switzerland does “go big” - it does it not so well. The Mall of Switzerland is one example. Its plan may have looked good to start with, but ultimately did not fit to the times. And - it fed into the natural prejudices of locals against “whatever is big.”
The tragedy of Roche, Novartis and other industrial giants in Switzerland is that once they reach a certain size - they forget what made them great.
If the pharma CEOs would “learn the lesson” of the Mall of Switzerland and focus on the dynamism of small companies, they would do well. Acquiring new companies doesn’t have to be seen as a threat or a cultural challenge - it CAN BE a match made in heaven.
Investors in Switzerland would do well to pay attention to the “small fish”…
We would love to hear your thoughts…!
➕The Bonus:
❌More emptiness - Bankruptcies in Switzerland are up - some say as a result of corona funding running out. (Link)
📐Unbuildable - The vicious circle in housing continues. An increase in demand is not being met by new apartment building. Is Switzerland “unbuildable”? (Link)
⏲Part-time, full-price - A Zürich-based construction firm, Elektro Oberland GmbH, has experimented with a 4-day work week. And it isn’t going back. (Link)