Three Ways to Invest for the Future in Uncertain Times

Three Ways to Invest for the Future in Uncertain Times

It is often forgotten that, besides profits, investments are key for the long-term success of a company. Why investing in uncertain times is important explains SIX CFO Daniel Schmucki.

We live in a world geared toward the bottom line. The daily share prices on our stock exchange are a great example. Investors look spellbound at the actual and expected profits. Buy, hold, or sell? The assessment follows immediately. Companies always need to find the right balance between retaining the capacity for innovation, developing competitive pricing, and establishing a suitably attractive dividend policy while defining the target profit. But many often forget that, in addition to profits, the question of investments plays an important role. They are important to determine the long-term success of a company. In the words of John F. Kennedy: “There is only one thing more expensive than investments, namely no investments.” These words apply – even, or maybe especially, in today’s times of great economic, technological, and political uncertainty. Uncertainty is something CFOs by nature don’t like, but given growing uncertainties, there are three key ways for me to invest: in innovation, in financial capital, and in knowledge.

Let me begin with a few thoughts on investing in innovation. The latest half-year result of SIX is a good example – invest today, be successful in the future. With the SIX Digital Exchange (SDX), SIX is currently launching a major project for the future. The Blockchain technology and the token economy are bringing about revolutionary changes. If SIX wants to continue to play a key role in the future, considerable resources must be invested. This naturally leads to a temporarily lower profit for SIX today. If we want to maintain our long-term ambition and remain the driving force behind the transformation of financial markets, however, such investments are indispensable. We are the infrastructure provider for the Swiss financial center. As a result, we must focus on its long-term competitiveness. To do so, we need to manage our profit and loss statement or our balance sheet more like an entrepreneur: forward-looking (not short-term bonus driven), prudent, decisive, and sustainable.

Naturally, investing in innovation also requires a significant commitment of financial capital. Of course, we don’t do this as a start-up, but from a relatively secure and strong position. After all, the Swiss banks are our shareholders. But we need the mindset, drive, and power of a start-up. SIX benefits from start-ups by drawing upon their fresh, bold approach  ̶  free from the constraints of a big corporate environment  ̶  as a thought-provoking impulse. And start-ups, in turn, benefit from the experience and the network that SIX provides. We collaborate closely with start-ups or even invest in newly established companies through our SIX FinTech Ventures – our Corporate Venture Fund. We do this out of the conviction that we need a lively exchange between established companies like SIX and young, and fresh ones. Looking back, the reason why is clear. Who has made a decisive contribution to the transformation to a digital economy in the last 20 years? The Internet giants from Silicon Valley. They once started out as very small start-ups. Equally, many people fail to take into account that these companies continue to be successful only because they have a culture of innovation. They have always been willing to permanently challenge their business model and make necessary changes. They realized early on that you can’t and shouldn’t do everything yourself. That’s why they always invested in other start-ups and brought in know-how along with disruptive market potential and integrated it into their culture. The SIX FinTech Ventures aim to do similar things.

I have always been very interested in start-ups and started 12 years ago to invest in them as well. I am not driven by the idea of fast money, but rather by the ambition of seeing a new business model break through with my modest investment or my personal commitment. And I always invested in the founders, because they are the fundament and guarantor for the success. In addition, it is intellectually enormously enriching to deal with new business ideas from entirely different industries.

This leads to my final point, investing in knowledge. The best investment is still one’s own education or knowledge. I know, this thought is common knowledge. However, I want to make another point and would like to take this idea further. Thanks to globalization and technology, it has never been easier to invest in professional networks and exchange knowledge and experience. The intelligence of such a network is always higher than the intelligence of each individual member. If there is also great diversity and a culture of openness, such networks are unrivalled in solving problems. But this requires time and energy. I can only recommend everyone get involved in these networks. My experience as Chairman of the Association of Swiss Chief Financial Officers (VSF) is priceless. In my current function at SIX, I benefit greatly from this exchange of experiences. It is a relief that such networks not only organize themselves physically, but also virtually. LinkedIn is a good example. But similar to the analogue world, in the digital world you also have to get involved, present yourself, and feed interesting facts into your network. Only then will you also benefit from it.