Finland's new "Golden Age"

Economy & Markets
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Finland’s economic success has largely been based on the forest sector and industrial products; later, technology and and electronics exports have also played a significant role.

Now that a lost decade for the economy is behind us, there’s a better vibe in the air again. Even though there’s a bit of turbulence in the markets right now.

For me, these positive feelings are sparked by three megatrends:

  • Replacing plastic with pulp-based materials
  • 5G
  • Stricter emission requirements for ships

All these large-scale changes align well with Finland’s best areas of expertise and existing production infrastructure. You can probably already guess the relevant companies?

Merry Christmas to all!

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However, there are a few small problems.

In the forest sector, the availability of wood becomes an issue. Even now, new investments are limited by the insufficient availability of wood. So, if pulp-based solutions are used to replace plastic, Finnish forest companies will certainly benefit, but Finland’s overall benefit will be rather limited. One can only hope that higher value-added investments will come to Finland if new products are to be produced more widely.

5G. Nokia and a few subcontractors will benefit from it, but again, the actual production takes place elsewhere. Wärtsilä is facing a similar fate to some extent.

Nowadays, everything is so global that Finland won’t get any production hub. The expert level, on the other hand, is another matter, but it requires the development of society in such a direction that we would again be competitive and that individuals would genuinely find it reasonable to stay here or even move here for work.

It’s not enough that Finland has companies suited to megatrends; we also need those at the forefront creating new technology. Nokia is also becoming more and more of a bulk producer. Of course, Nokia can change its position in the value chain, but it’s not easy. Developing 5G technology is not enough; more software-based products are needed.

So, a new great world conquest by a Finnish company is not yet in sight. Although Finns are in good positions in the sectors you mentioned, significant prosperity requires being a clear pioneer with new technological solutions in rapidly growing sectors.

This doesn’t mean that Finland couldn’t do well. In the early 2000s, the situation seemed to be that money flowed to Finns from all directions. Nokia’s market value was also many times that of Finland’s state budget. A lot was produced in Finland. Funds and taxes remained in Finland. A large number of employees became rich because such a large part of the company was in Finland. In Nokia’s case, it also seemed that during difficult times, many new owners were gained through share issues, who then became rich with Nokia’s prosperity. Thus, wealth was distributed to many private individuals, making the impact on the economy significantly greater than if ownership were concentrated.

That was like a lottery win for Finland, and many pieces fell into place. Similar luck is unlikely to be encountered again. Finland should be able to adapt better to a changing world and get the whole system changed, so that it would foster the birth of new Nokias.

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Good opening. I would add resource efficiency as a general trend here, where Finland has a great opportunity to combine IT expertise and traditional industrial engineering expertise. Ensuring the Earth’s carrying capacity requires enormous measures, and this, if anything, presents business opportunities. This can mean both utilizing renewable resources and fundamentally reducing resource use (without cutting living standards) through, for example, optimizing operations or virtual reality. As an investor, I also try to find these for my own portfolio.

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Has anything concrete been found with a 1-2 year time horizon in terms of cash flow and global scale?

In the circular economy, nothing particularly juicy has caught my eye, even though it’s a good story.

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In a large number of the companies in my portfolio, the “more with less” theme is somehow present, for example, Talenom, Revenio, Nokia, and Qt. I am also invested in cybersecurity companies (especially Nixu), as they enable the realization of disruption and thus the efficiency brought by digitalization. Most interest is aroused by business built around 5G, VR/AR, and IoT – new winners from these disruptions will surely emerge on the Helsinki Stock Exchange as well, and I intend to be alert then.

In “traditional” industry, there are several companies that I monitor but do not currently own, such as Wärtsilä, Neste, SSAB, and forest companies. What interests me most in these is whether the new technologies are driven by a genuine attempt to create new types of solutions. This has been the case, for example, with Neste, and the results have been commensurate.

Loudspring (I am involved with a small weighting) has interesting portfolio companies from a resource efficiency perspective, but startups are generally quite a challenging world for a small investor.

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