Kingsley Wheaton
Welcome to the latest episode of the Smokeless Word. I'm absolutely delighted to bring you the Smokeless Word Sweden, as I'm here in Stockholm, joined by Professor Christian Sandström, academic and author Christian I will talk about his career in academia, bottom-up versus top-down innovation. We'll talk about green bubbles. We'll talk about silent miracles, and we'll talk about how the Swedish smokeless silent miracle can influence tobacco harm reduction thinking all over the world, underpinned by pragmatic step-wise change. This podcast is intended for regulators, scientists, policy makers and investors only. The views expressed in this podcast are the personal opinions of the speaker only. Any references to products having a reduced-risk or reduced harm are based on the weight of evidence, and assume no continued smoking. This material is not intended for U.S. audiences. Christian, huge welcome to the studio, to the Smokeless Word. Thank you for joining us.

Christian Sandström
Thank you. Great to be here

Kingsley Wheaton
So, academic, professor, disruptive innovation believer, shall we say? Can I just take you back to before your academic career started? I'd be really interested to understand, you know, what it is that was formative in your, in your upbringing, in your in your childhood, perhaps that made you interested in the areas that you've become so notable in?

Christian Sandström
So, I mean, I can go back to my teenage years, perhaps where, you know, I recall my grandfather, he was a businessman. He a small business of his own, you know, selling tractors in Sweden, back in the 1940s 1950s self reliant. And, you know, told me a lot about the dangers of totalitarianism, so that got me interested. You know, going to my teenage years, I wanted to figure out, like, why is it that these high ideals that they set out to accomplish in totalitarian nations, historically, turned out to become such huge disasters? You know, and all these intentions that at least they were marketed as good intentions, but how it can go so bad, you know? And that riddle, I think, has stayed with me ever since in various formats. And I mean, I've looked at large organizations that struggle to adapt to momentous, you know, big changes, disruption. I looked at the Eastman Kodak company to shift to digital photography. I've looked at, you know, old corporations that used to make mechanical calculators and the shift to electronics back in the 1970s and I was sitting there in in the archives, looking, trying to figure out what was actually going on, you know, with the top management. What was in their mind and what wasn't in their mind, you know?

Kingsley Wheaton
At that point, you know, academic career or corporate perhaps career, or was there a choice? Was there? Was there a sort of two pathways there? And you very knowingly went down the academic pathway?

Christian Sandström
You know, you come to that point, perhaps the age of 22,23 you've done a few years at uni, and you're supposed to get a haircut and a job, you know? And I got the haircut part reluctantly, I must say, but the job part, I didn't quite figure out. I just couldn't see the value of a corporate career back then. So at least, you know, if I go to into academia, I could do whatever I want, and I don't need to have a boss. Was my kind of thinking. I kind of enjoyed the teaching part of it too, and the ability to formulate your your own problems. One career path I found a little bit interesting back then would have been to join, actually, Swedish Match, your competitor. Because I thought to myself, you know, what we have in Sweden with snus back then this is, you know, 2004 2005 is so different from in other countries where people are smoking and, and I would tell, sort of my classmates about that half as a joke, you know. And, you know, a little bit serious too, but, but so that was me, going back to the, you know, the early 2000s but, you know, people get a haircut and a job. I get a haircut in a PhD position. Here we are, you know.

Kingsley Wheaton
And I mean, you were, we were talking before this, you know, at that time, Swedish Match versus, let's say what might be called, you know, big tobacco. You know, I think you already perceived a difference, didn't you? You know, in your own mind, you perceived a difference between a smokeless business and a cigarette?

Christian Sandström
Oh, yes, yes. I recall very clearly how, you know, I would go and meet potential employers with other students. And you know, we're meeting up with one big tobacco company, and one student just said point blank that, you know, I'm sorry, guys, but my dad is smoking, and he's got all these issues with his lungs, and I just can't work in a business like this. I'm sorry, guys. And I was like, Yeah, I can't disagree with that. But then I thought also, well, non-smoking, that's that might be interesting, actually, if you can make people stop smoking, you know, that way forward, but then you would have these, not how to say this idealist in, you know, argument against it, that then you would still be contributing to tobacco consumption, right? And, well, I'm not sure I had a good answer back then, and I never given it a lot of thought, really, I mean, I, I went another path in life.

Kingsley Wheaton
Talking about green bubbles, you know, this seems to be the one thing I kept seeing repeated in the in the Christian Sandström story was green bubbles, for those people who are listening, just maybe give us the 101, of green bubbles and and the theory that you're sort of espousing there?

Christian Sandström
Yeah. So I started in parallel with my work on digitalization, digital disruptions, look into these huge attempts at green transition. And one case, you know, I've always been fascinated with what doesn't work. I'm not the great positive speaker of the day. I'm the great negative speaker of the day. I would find something that doesn't work and try to figure out why. And we had a bubble in Sweden ethanol cars in the early 2000s where, you know, the fuel of the future that would be sustainable and green and non fossil would be ethanol. You know, sweet had consumed a fair bit of ethanol historically as well, you know. So there was a fine tradition in one sense, but that didn't work out. It wasn't good for the environment. It didn't work out economically or financially. It didn't work out technologically, and the whole country just went for a good 5,6,7 years in the wrong direction, going totally astray, until it backfired, and it all crashed down. And you know, I'd done that, and a friend of mine told me, you know, early 2021 Hey, have you looked into this thing called Fossil Free steel, which they're going to make up north and Sweden? And I was like, No, I don't want to hear more because people just call me a climate denialist if I go against it. So I just can't, but just have a look at it. And I looked at it, and it was exactly the same as ethanol, with a difference that you had more numbers on each figure, like two or three more, you know, more noughts, yeah. So I was like, I can't stop myself. I need to go into this and start to ask some serious questions. So I became the grumpy contrarian with these things, you know? And then I started looking into wind farms. I started looking into lo and behold batteries and the Northvolt thing. And two weeks ago, I launched my book called, in Viking tongue, "Northvolt crashing". Yeah, the Northvolt crash in Swedish, you know, if it sounds too good to be true, it is too good to be true, is my way of thinking about it. And Northvolt was the largest European effort to try to make batteries of our own.

Kingsley Wheaton
And these are what lithium ion batteries, basically, more or less. So they would say, would power cars eventually, that sort of thing?

Christian Sandström
Powering the green transition. Okay, so government money goes into it in various forms government support. They're setting it up in the north of Sweden. They're saying, we're going to re-industrialize this rural area. We're going to make use of the clean hydroelectric power. It's going to be independent of Chinese suppliers, and it's all going to be fantastic. And it, it ended up being the largest bankruptcy in Swedish history, since the 1930s really. And it is top five six of bankruptcies in Europe historically. So it's, it's huge, this collapse.

Kingsley Wheaton
How much, so give me some financial dimension?

Christian Sandström
Yes, so total money that went into it was approximately $21 billion that went in, okay, unpaid debt, which is left after the bankruptcy in March this year, 83 billion SEK. So, you know, $8-9 billion.

Kingsley Wheaton
You know, I think you, you hint Christian here at a sort of a politicization, you know. I mean, you know, one of our former prime ministers used to talk about, you know, shovel ready projects, or whatever.

Christian Sandström
That's a great term.

Kingsley Wheaton
You know, shovel ready, you know. And I think you were talking about them, sort of there with the spade, yeah, you know, breaking the ground is, this is all part of this. So how does that play out?

Christian Sandström
It's, it's part of the green bubble logic, where the Swedish Prime Minister in 2004 when he was inaugurating the ethanol factory up north, he said, we're going to have green jobs, we're going to have world leading export, we're going to have new technology, and we're going to reindustrialize, you know, the parts of Sweden that has been losing population over the, you know, the past 50 Years. And again and again, if it sounds too good to be true, it is too good to be true. But if you take now the inaugurations of various green bubble initiatives over the past 2,3,4 years, and you take that original speech in 2004 it's exactly the same, like you remove ethanol and you say green battery, you remove ethanol, and you say Fossil Free steel, and the logic is there. So we're talking about something that is it's stagnation, but it's irresistible stagnation, because as a politician, you can't help yourself, and if you're a politician questioning it, you appear to be against all these things, or, if you're an academic, questioning it, it's the same.

Kingsley Wheaton
You know, can I sort of just flip to something which is slightly different, because it was private sector that you've reflected on, and I think is probably more synonymous with our smokeless transformation, transition. And I'll come on. I'll do them one by one, but maybe just talk about Kodak. Because, of course, there's no subsidy capitalism there. There's no politicization. There's no big, big, big sort of money coming from the exchequer. And yet that was also a miss what happened in the Kodak story, per what you've researched?

Christian Sandström
It's a huge 100 year old private, pretty much monopoly that is then from the early 1980s actually declining. So people think, yeah, digital killed Kodak. And this is true, but if you look at Kodak was at its height. It was the mightiest giant in 1975 from there. And the first threat is spelled Fuji Film, which is, you know, grabbing a little bit of market share here, a little bit there. And Kodak is not used to competition at all at this point in time. And then comes digital from, you know, it gains full swing in the early 2000s so film consumption goes down 75% 2002, 2003, 2004. The directors in Rochester, New York said, well, if this forecast continues, we have already manufactured all film that will ever be used in the in the future of mankind. You know, that's, you know, shut the lights. Don't forget to shut it down when we leave. But how does this play out for you? I mean, you have a history, a background, and now you're going as much as you can into non smoking things. How does this play out for you?

Kingsley Wheaton
Yeah. I mean, it's a,

Christian Sandström
Big transition, right?

Kingsley Wheaton
Yeah. And, I mean, you know, it's interesting when you talk about Kodak, Christian, because that was, that's often been, you know, historically that was leveled at us. You know, is this your Kodak moment? I think the comparison, if I may say it's a little superficial at times, because that was an absolute transition of one technology for another. It's not quite the same as you try and move to smokeless because you've got something called consumer satisfaction that gets in the way. So probably by about 2000 digital, digital photography is probably better than Ektachrome I'm getting, I'm guessing, but, but there are some parallels. Now, it's interesting. I was, I was asked by the then CEO to establish our Next-generation products business in 2015. So we did have the Board minutes that made that decision. So that's good, but you know, it was pretty it was pretty daunting. You know, at that moment in 2015 January, 2015, and some of the colleagues who work with me are still at BAT. They're fellow members of the management board. We had zero revenue from that in smokeless, zero. Our entire business was combustible. And, of course, I get asked a lot, well, why don't you just stop selling cigarettes? Well, again, slightly superficial, I think, you know, we have, we need the cash flows. We need the profitability from cigarettes. To invest in that future. We had a very simple plan in 2015 I called it the 100, 200, 400 plan. Which was to get to the first 100 million pounds of revenue and then double it and double it again. And lo and behold, by about 2018 we were at about half a billion pounds of revenue. And that set a bridgehead for today, about 19%, three and a half billion pounds of our revenues are in smokeless. But there was real intent there. The only thing I would say, if you know, I think to the heart of your question, if I underestimated anything, is I thought it would be easier than it would be. You know, I thought big global company, plenty of access to capital, big firepower, consumer understanding, route to market. I suppose, deep down, it just shows how difficult transformation is.

Christian Sandström
It is, it is, and one should be humble about it. Yeah, absolutely. And at times I come across as the ones that are pointing my finger finger, but you know, it's so deeply rooted in routines, in behaviour, in incentive structures, in everything.

Kingsley Wheaton
Beliefs, yes, values sometimes.

Christian Sandström
And you look at one pattern across these different cases, is big corporations think big. But everything new, by definition, starts small as something small. And I can see that playing out with the Nokia case going back. So, you go, I went through all their slides that they presented to, you know, the stock market in these critical years. You know, 2006 up until 2012-13, you know, and by 2007 this is when Steve Jobs is launching the iPhone.

Kingsley Wheaton
Of course.

Christian Sandström
And then 2008-9 Android comes along, Samsung, and the modern ecosystem is emerging.

Kingsley Wheaton
Now look, let's try and end with some advice for us. You know, we have this silent miracle going on in Sweden, snus, smokeless products. I don't even know it's banned. It's banned in Europe.

Christian Sandström
Okay?

Kingsley Wheaton
It's actually banned. Snus is actually banned in Europe. In fact,

Christian Sandström
Still today? I know it was, you know, some 20 years ago, but I haven't followed it really.

Kingsley Wheaton
Sweden, Sweden as part of his accession, or whatever, you know, negotiate a carve out. In fact, Sweden is one of the country voices. And I think you and I were talking about it outside when we and, let's not, let's not get into Brexit. But when we talked about, you know, the UK and Scandinavian axis, you know, who actually bring a lot of common sense, you know, what? What practical recommendations would you have for us to try and get EU lawmakers, EU policy makers, to take this smokeless transition more seriously based on the Swedish experience.

Christian Sandström
So I often get, I get, you know, people would accuse me of being a climate denialist just because I've been writing books about green bubbles and pointing at the fact that this doesn't work. And I think I learned somewhere along the way that, you know, if I am to question a status quo or something that is so politically popular, I need to earn my seat at the table. And I try to do so by writing academic books, academic papers. I try to do so by pointing out what actually works. I try to focus on the positive side when I can identify it too. And that's that I think I learned from from my own work, that I need to be able to tell a story, and I need to earn my seat at the table, you know.

Kingsley Wheaton
But, but, if I can, you know, obviously your work is evidential.

Christian Sandström
You know, people would say it's anecdotal.

Kingsley Wheaton
Okay, yeah, you know, but, but there's, there's some, you know, in the same way that we're trying to do, you know, we've got the science, we've got the evidence, we've got the advocacy. But I think in even meeting you today, you know your your delivery is, is, I think you recognized it's more than that. You also have to tell the story, right? You have to narrate it. You have an oratory, which is beyond just the facts, if you see what I mean?

Christian Sandström
So, totally. And and this is something I've seen with those corporations that successfully manage the disruption. Like I also got that question, well, you're only looking at the Nokia and the Kodak, yeah?

Kingsley Wheaton
What about, what about? What about the winners?

Christian Sandström
Give us the winners and explain why those win and Apple is one of those, to be honest, and you go back to Steve Jobs, and he's very clear with his almost dictator when it comes to his his way of deciding things. I decide you as a customer, you don't know what you want, whatsoever. I have a vision. I am proactive when it comes to my role in society. I'm not merely passively adapting to a predefined set of needs in the market, you know? So

Kingsley Wheaton
Thought leadership?

Christian Sandström
Creating the future, rather than asking trying to predict the future, is what a lot of people do, and and it's, it's creating it and pursuing that agency as an as an organization. And, well, I think if meeting some of your colleagues, and I think I'm a bit, you know, almost surprised how enthusiastic people are about smokeless.

Kingsley Wheaton
Yeah, yeah, well, yeah, yeah, yeah. Why are you surprised?

Christian Sandström
You wouldn't. I wouldn't expect people working for big tobacco, and you meet them, and you see that they are driven by meaning,

Kingsley Wheaton
Purpose!

Christian Sandström
Purpose.

Kingsley Wheaton
Christian, you know, I interview a lot of people over the years, and they perhaps step into the head office in London, and then very often I hear this refrain. They say, well, you're not what I expected.

Christian Sandström
Totally.

Kingsley Wheaton
If you want to make BAT an object, you can attack it. It's 47,000 people, of which I think we have a graduate subscription to roll rate of about 200. For every 200 that apply, one gets a roll. So still, young adults coming into the business who are guided by purpose, who

Christian Sandström
Have you noticed that? Like to recruit somebody today, and during an interview, what would they say? Like, let me tell you this story. Again. I was still rather young and promising. I had been a visiting scholar during my postdoc at the University of Cambridge, and the year after, I applied for a position there as a senior lecturer. So I was fortunate to, you know, be one of the candidates they interviewed, but I never got the position. And here's the question, which I think I failed, and was the most senior professor of them all, one of those who was, you know, allowed to walk on the grass, you know, one of the one those man in his 60s, and he asked me this one question, and he asked, Why do you want the job? And I did not have a good answer to that I was actually and and the fact that I didn't that told me something also, is this something I really want? Yeah, do I want to move to the UK? Yeah, at this point in time in my life? Do I want to be a senior lecturer, or do I want to be sort of, continue in Sweden with whatever I'm doing?

Kingsley Wheaton
You didn't really have the rationale.

Christian Sandström
I did not have a good answer.

Kingsley Wheaton
At your fingertips.

Christian Sandström
Yes. And he, you know, having his experience,

Kingsley Wheaton
He spotted that.

Christian Sandström
He sensed it. And I probably sensed it too. And I have asked that question when I've interviewed people, and then I don't necessarily listen, but I look in their eyes, and the answer is, right there,

Kingsley Wheaton
Yeah, well, you know, I can tell you that, you know, you know, it's a very technical language in HR land. Is that our employer value proposition, you know? But let's just say our sort of, I tend to think of it as sort of corporate equity, you know, has been massively boosted by the transformation. I think most people now will join us, because there's a purposeful drive to change. That's quite an irresistible thought for me. When I interview people today, this has been hugely powerful Omni. They tend to know more about the Omni than we do internally, because that's now their go to, to understand BAT. Also the capabilities, the roles you know that we bring people, if you. Let me give an example, if you were an engineer and you wanted to join BAT 15 years ago, the only role for you really would have been to work on the big, heavy, clanking machinery turning out cigarettes. Today we've got all engineering disciplines, you know, through electronic engineers, you know, battery technology, materials scientists, you know. So I think it's sort of it's created a whole new world of opportunity. But I always say to people, one of the reasons why I like this podcast is I think BAT has got to turn itself inside out. It's got to turn itself inside out. Because if you came and spent a week with us in London, I would guarantee you would go away and you would have absolutely no doubt as to the intent of our transformation. And it only points to the thing I said earlier, that it's always a lot harder than you think, to transform. Were it easy? We would have done it, we would have done it already. You know, we'd flick the switch, but there is no switch, just hard yards.

Christian Sandström
But how would you respond to because I bet you get that argument. Well, you're still making money on this cigarettes. Is that still your bread and butter? What's your answer?

Kingsley Wheaton
Yeah. Well, let me give you, let me give you a beautifully academic answer. Maybe this is, this is where we'll end. You know, in there's a very live case study in in South Africa through COVID, where they banned smoking for five months. And there was a relief that somehow, you know, cigarette smoking the lips and whatever was a way of COVID passing around. So the government said no more cigarettes going to be sold. What do you think happened to consumer consumption of cigarettes in those five months? Answer, nothing, zero. It was just that vacuum was merely filled by illicit traders, contraband and counterfeit. And the bottom line is, if you're going to manage a sustainable transformation, you don't solve a demand side problem with a supply side solution. And just say BAT won't supply them anymore, because that won't usher in a smokeless world. It will simply mean that somebody else will fill that demand. And you add to the fact that we've got a transformation to fund. So actually, it's a bit like, you know, this silent miracle. It might take us decades, but it will happen rather than just pulling out of a marketplace and then let someone else fill it. So responsible thought-leadership of the smokeless transformation might take a bit longer, but I think gets you to a better place.

Christian Sandström
If I may, throw in a little anecdote here. There's there's this economist published a paper in 1983 coining the notion of Baptists and bootleggers

Kingsley Wheaton
right? Okay.

Christian Sandström
Yeah, And he, he based that upon the observation that when there was a ban on sales of alcohol in the United States. Yeah, back, I think it's 1920s, there were two groups benefiting from it. One was Baptists, sort of the idealists who wanted to abolish it completely. Drinking was a problem in the U.S. back then, so you can understand that position. And the other were bootleggers.

Kingsley Wheaton
Bootleggers!

Christian Sandström
Yeah, and it sounds good, and it's the utopian or idealist or Puritan way of policy.

Kingsley Wheaton
It doesn't work. I mean, I'll give you, I'll give you a bootlegger story. You know, Australia today. Australia today, 75 to 80% of all tobacco and nicotine consumed in Australia is contraband, counterfeit, illicit in Australia, 75 to 80%. Because of a massively backfired belief that somehow you're watching legitimate demand for smoking go down, you've solved the problem, and you're not looking at the bootleggers who are running the market. And you know, they if Sweden is the poster child for a smokeless transition through, you know, this sort of silent miracle approach, I think Australia is the poster child for the opposite Christian. It's been absolutely brilliant to speak to you. I've loved our conversation. Thank you for joining us. Here, Omni Sweden has been, has been an absolutely fantastic experience, and I look forward to talking more in the future. Thank you ever so much.

Christian Sandström
Thank you. Thank you, Kingsley.

These transcripts are AI-generated and may contain errors or inaccuracies and should not be relied upon.