Make money, not war

Switzerland, crowned the world’s most innovative country, maintains a centuries-old tradition of building on brainpower, as Eric Johnson reports

If you are light on natural resources, how do you earn? In Switzerland’s youth, the answer was simple: fight. In the late-1200s, its leading export was military technology. To defeat their former Habsburg lords, Swiss men had invented some serious battle strategies and tactics. So, have pike, will travel. They hired themselves out to nearby nobility, leading to victories at long-forgotten battlegrounds, such as Héricourt, Marignano and Schwaderloh.

Eventually their skills were overtaken by foreign archers and gunners, but the spirit of innovation remained. As Google’s country director Patrick Warnking puts it: “Switzerland is where the inventive spirit lives.” Helvetia was and still is a place where people take what they have and make the best of it.

Very best, actually. The Global Innovation Index 2013, published by Cornell University, INSEAD and the World Intellectual Property Organization, names Switzerland the world’s most innovative country, followed by Sweden, the UK, Netherlands and the United States. The World Economic Forum (WEF) sees things similarly in its 2013-14 innovation ratings: Switzerland ranks second only to Finland.

Is it something in the mountain water or air? Yes, in part. Switzerland’s outstanding surroundings clearly attract the brains who staff hothouses, such as the Large Hadron Collider (Geneva), Google’s European Headquarters (Zurich) or the Novartis/Roche-led pharma-cluster (Basel). “These people, these institutions, they could locate anywhere,” observes AccountAbility senior adviser Stefan Ruegg. “And yet they choose to locate here.”

The main reasons for Helvetic inventiveness sound as if they were lifted straight from an economics textbook. Indeed, the WEF’s Global Competitiveness Report reads like one. Put in vernacular, they boil down to five factors.

First, things work. Reliability is one of those unsung virtues that Switzerland has in spades. Transport runs on time. It is so punctual, a brief delay will have regulars fuming or baffled, repeatedly checking the time in disbelief. Other public services are good, streets are safe, the landscape is manicured and life generally unfolds in proper order.

The main reasons for Helvetic inventiveness boil down to five factors – reliability, schooling, R&D, limited government interference and low taxes

While this can seem eerie, even boring, to those from less-ordered countries, Helvetic dependability, says the national business confederation Economiesuisse, is a pre-condition for investment in innovation. “Creativity is enough of challenge in itself,” adds Pascal Ribary, a serial entrepreneur in Zurich. “I don’t want extra worries of, say, whether the infrastructure works.”

Schooling in Switzerland is practical. Teaching centres on languages, including English, and maths, leavened with science and technology. About four fifths of all youth pursue what Anglo-Saxon circles would call a “vocational” track. And they keep on learning as adults: three quarters of all workers are in continuing education or training.

“We are unique in our concentration on the real world,” says Peter Gomez, who recently retired as president of the University of St Gallen. “Our workers are better prepared for work than any others.”

That work often directly involves research and development. WEF’s competitiveness report rates Switzerland first in company R&D spending and university-industry research collaboration. The country has the world’s highest per-capita density of top-500 universities and seven of the top 200. All this manifests in another WEF ranking: number two in per-capita patents.

The final two factors are set by government. With the exception of farming, markets for labour, trade and capital are largely unfettered. And government generally gets out of the way of innovators, letting them choose their own direction, without obvious industrial policy, while both taxing and regulating lightly.

Chocolatiery, private banking and watchmaking are so renowned they have become clichés. Barry Callebaut, the world’s largest bulk-chocolate producer, is headquartered here. Credit Suisse, UBS and their fellow “gnomes of Zurich” compete globally and have been frontrunners in the creation of financial derivatives. Swatch has become the world’s biggest horologer, with popular and luxury brands, plus leadership in watch movements and components.

Right behind them in recognition are clusters in commodity trading, industrial processing, insurance, re-insurance and pharmaceuticals. Geneva and Zug are hubs for dealing in grain, metals, oil, ore and refined products. The sector’s largest player, GlencoreXstrata, has pioneered the backwards-integration of trading into production and logistics. One of power engineering’s largest firms, ABB, is rooted in Baden. Process-equipment engineers Bühler, Georg Fischer, Schindler and Sulzer are dotted about the centre and east.

Insurers are spread among all the major cities, while re-insurers are concentrated in Zurich. The latter have been innovative in funding, helping to launch catastrophe-bonds in the mid-1990s. Pharmaceuticals are mainly in the “chemistry triangle” around Basel. Much of the chemicals capacity has emigrated, but pill-making and the research behind it still employ many thousands.

Probably less known is another healthcare-related sector, med-tech. Spread across mid-Switzerland are outfits, such as synthetic-bone maker Zimmer (formerly part of Sulzer), hearing aid producer Sonova, and implant suppliers Medtronic and Straumann.

Finally there is nano-technology, which is well known, but unlikely to be readily associated with Switzerland; wrongly so because the Polytechnic-IBM collaboration is world class. At a new, $200-million laboratory near Zurich, they experiment with individual atoms and unwittingly remind Helvetic innovation of its roots. In May, the Swiss government awarded an innovation prize to IBM, for its nano-tech progress, named after one of those early arms inventors: a crossbow legend called William Tell.