I have an interesting anecdote to share, couple of years back I was working in an Indian branch of an MNC. The water from the tap on a wash basin had low pressure and it was frustrating to wash your hands but I guess we never complained because in India you just accept such minor inconvenience.
One day the VP from the American HQ came to the Indian office and yes he was German, during the intro meeting he talked about the low pressure from the tap. The tap was changed the next day.
I still remember that story because it taught me how Indians look at their surroundings and how a German looks at the same surroundings.
Or put differently: culture is a major driver. The culturally similar Austria and Switzerland, and to a certain extent the Scandinavian countries, have similar strengths.
Sure there are some contributing factors (eurozone monetary policy, labour laws), but thats really the core. I feel like the education system, world class science institutes (Fraunhofer, Max Planck and Helmholtz) and pragmatic vocational training are really just a result of that.
One time in an expensive hotel in Asia, there were a few times when things were simply wrong, even though we had a named person assigned to our group as a manager to call on.
I met with the German general manager and suggested that his systems for ensuring a quality experience were not correctly set up.
He sat up straight in his chair and told me that he would deal with all the issues we had. From then on we had no more problems with the account manager...
Umpteen years ago, a woman of my acquaintance said that her bathtub had a very poor supply of hot water. I glanced behind it--it was freestanding--turned a knob till it stopped, and the hot water ran a lot better. To be sure, my last name reflects German ancestry, but so did hers.
This is a model I desperately hope returns in a big way around the world. The modern education-factory model is a post WW2 invention and the quicker we can EOL it the better.
We got so much from the older model and I dare say people lived better lives while studying.
I've often idly wondered if you could do Software Development as an apprenticeship. Use industry tools in your work day, and theoretical computer science at night schools/block courses.
> The high taxes on assets in France and the inheritance tax in the U.S. prevent the accumulation of capital necessary for the formation of a strong mid-sized sector.
I am surprised by this assertion. Allegedly family-managed firms can make long term decisions, but those observations are always subject to survivorship bias. At best I would think this issue marginal. (There's also a bias in the statement, as inheritance tax in the US is quite low and kicks in at a pretty high level).
I would think if anything the ability to inherit reduces the likihood of outside ideas.
(And anyway, in a republic, inheritance is abhorrent. We don't need another aristocracy.)
You don't have to hedge, that comment about inheritance tax is literally ridiculous and completely unsupported. The idea that the US has a problem with too little accumulation of intergenerational wealth is patent nonsense.
> And anyway, in a republic, inheritance is abhorrent. We don't need another aristocracy
In the modern age, making decisions based on feelings rather than statistical evidence is abhorrent. $10 million dollars is peanuts for a successful business and if the majority of the wealth is tied up in a business what you are in effect doing is destroying a productive asset of the US economy for short term gain.
Rather than using your misguided moralisms to decide policy we should use evidence to decide on the policy that results in the best outcomes.
And so only the rich inherit... as over time banks and other businesses figure out how to take away all the income from the middle class. then the higher business class which has huge amounts of capital moves it overseas to generate greater returns. the country hollows out. Something very similar happens in third world countries. To do any sort of real business you need capital. If you don't have it you are in no position to actually do any sort of real business or even try.
> The high taxes on assets in France and the inheritance tax in the U.S. prevent the accumulation of capital necessary for the formation of a strong mid-sized sector.
How can you write stuff like that and stay serious?
I wondered about that too. I find it hard to believe that Germany has no inheritance tax, and capital seems to accummulate extremely well in the US (far too much, I would argue). And the existence of corporations make inheritance irrelevant to the accummulation of capital for businesses.
It's the strange writing style of self-righteous ideologues who have to cram something irrelevant about their ideology in everything they write.
I once read a book on mental heath by a professional academic who threw in something about how some irrelevant conclusion in the mental health field showed government was inherently wrong.
I was surprised the article didn't mention the euro, specifically how Germany gets to denominate its goods in a cheap currency that doesn't fully reflect its strong fiscal policies.
This is a huge thing - Germany couldn't run its huge trade surplus without its currency appreciating and reducing its competitiveness otherwise. It's a pretty bad deal for the consumption-based Eurozone economies though - they have to internally devalue instead of just being able to devalue their exchange rate.
It's one of the major problems with the Euro... It was a terrible idea from the start, and situations like Greece were foreseen by economists like the great Wynne Godley decades ago (see Maastricht and All That, London Review of Books, Oct 1992). Unfortunately the mainstream of economics still doesn't have a developed enough understanding of monetary systems to have worked that out yet...
The article asks why there are so many successful mid-size companies in Germany, and it lists reasons such as continuity of leadership, scientific competencies, system of apprenticeships and others.
I don't see how this answers the question in the title. How does the school of mathematics of the University of Goettingen help make German factory workers competitive with Chinese ones? Why aren't these companies moving their production to cheaper markets like companies elsewhere do?
I'm not an economy expert, but I'd say that the jobs that can be done with 'cheap labour' have already been moved to other countries long ago (at latest in the 90's after the reunification).
If you look at a typical German 'Mittelstand company', many look more like high-tec laboratories than typical factories from the inside, lots of robots, high automation, the people working there need to know the technology inside out, troubleshoot and fix problems quickly. That's difficult to get from a manufacturer on the other side of the globe who needs to juggle many different clients from all over the world.
And many German workers still have a certain loyalty to their company, since the company owner isn't some international celebrity CEO installed to squeeze the last bit of money out for 'shareholder value'.
"How does the school of mathematics of the University of Goettingen help make German factory workers competitive with Chinese ones?"
The search for precision and applied scientific discovery. [0] Enlightenment drives every aspect of German manufacturing. Factory workers are in an environment that makes things driven by these processes.
This is an extreme example. It also highlights why Chinese/German manufacturing is different. One is aiming at mass market, low cost. The other high cost but desirable. The low cost German manufactured cars are measurably better than the Chinese.
The HBR article cites the high inheritance tax in the U.S. as reason for the low number of middle class jobs. But, to the contrary, today the inheritance tax in the U.S. is lower than in Germany.
I'm not sure that's right, the German max rate is lower, though it might kick in at a lower level.
Regardless of the rate, there are big exemptions for the transfer of businesses in Germany that definitely give the the advantage in that specific case.
Indeed, that doesn't seem to be a very plausible contribution to the success of the Mittelstand. In the US, inheritances large enough to capitalize a mid-sized company are usually protected from inheritance taxes through a number of "tax-efficient structures".
I didn't really understand that point? Is the claim that if there was no inheritance tax, a family would accumulate enough money to start a mid-sized business? Or is the ownership of a business taxed upon death?
You could make the argument that the Mittelstand has profited from Germany's controlling stake and dominance in the EU. One of the big arguments for non German businesses seeking to leave the EU have been perceptions of unfair EU bureaucratic advantage to German businesses at the expense of other member states.
Having said that they have a very good national business model and an excellent culture around vocational training and expertise building.
Yes. They are insulated by EU trade tariffs on goods external to the EU. Combine that with the most efficient factories in the EU. They get to provide things that can still beat China after considering the tariffs.
In other words, trade barriers strengthened the middle class.
I don't find the arguments presented in the article for "why" to be very convincing.
- The most important difference is the continuity of the leadership. The leaders of the Hidden Champions stay at the helm for an average of 20 years
ok yes, could be
- the German history of many small independent states (until 1918 Germany consisted of 23 monarchies and three republics), which forced entrepreneurs to internationalize early on in a company’s development if they wanted to keep growing
there must be lots of countries where this is the case
- Scientific competencies also play an important role
there must be lots of countries where this is the case
- the unique German dual system of apprenticeship, which combines practical and theoretical training in non-academic trades.
ok yes, could be important
- Tax advantages are another reason.
skeptical
- the international openness of a society is an essential factor in the globalized world of the future. Germany is far ahead of other large countries with regard to mental internationalization
skeptical that this vague claim is true, let alone an important factor
e.g. "in companies with over 2000 workers just under half the seats on a supervisory board are selected by the workers"
seems like shareholders have less power and employees have more, under the German system, and it seems fairly logical that this could lead to long-lasting companies producing high-quality products
I'd like to think it's because WW2 changed us, for the better. We just want to build great things now and help everyone and not only ourselves. We respect others, independent of race or nationality, and it think we're much less superficial than some other countries are. But that holds true for most European countries so IDK, maybe I'm simplifying it too much right now. It just feels that way to me.
German culture is older than ww1/2. The german respect for labour predates the 20th century. So too in japan. Some like to think of modern japan and germany as only a product of post-ww2 development programs, but that denies the long history of these great nations. That they were able to participate in ww1/2 demonstrates thier success prior to that conflict. (Imho ww1 and ww2 should be read as one historical narrative.)
I would add differences in domestic consumers preferences. Americans are now addicted to cheap-quality goods. I passed through the gift shop inside Empire Sate Building in NY yesterday and 98% of the gifts are asian imported plastic trinkets branded with Empire State and USA logos. Contrasts that to when I visited the museums in Berlin where the shops mainly focused on selling locally produced crafts.
Germany had a strong Mittelstand (and was indeed struggling with an uncomfortably strong Deutsche Mark) long before the Euro.
I suspect it would have worked out.
Because German engineering is world-renowned. This much has been known for a good long while. You can take a German bearing of 'low quality' vs. a Chinese bearing of 'high quality' and easily tell that the German bearing is far superior.
It only makes sense such engineering capability would result in a lot of manufacturing work in the middle-class range.
Maybe the globalized world at any one time can only sustain one Germany with it's hidden champions. But ofcourse it's easier and well paying to travel around the world and tell everyone they can be like Germany too.
The world can sustain more than one because it already does. Switzerland has a very similar structure and is as successful, if not even more successful. It also shows that Germany doesn't just succeed because of a cheap exchange rate, since most products hidden champions produce aren't that price sensitive.
The world could probably sustain even more companies that focus on long term growth and quality instead of quick products. But that's not how you become famous. You become famous by making a quick app used by millions that you can IPO a few years later. So that's what many people in the world try to achieve. Not building a small company over decades that specializes in something which most people don't even know exists.
It's strange that they credit a holdover from the Holy Roman Empire days as being one of the reasons, but ignore the privatization of East German industry and the massive infrastructure investment after reunification.
[+] [-] sumedh|9 years ago|reply
One day the VP from the American HQ came to the Indian office and yes he was German, during the intro meeting he talked about the low pressure from the tap. The tap was changed the next day.
I still remember that story because it taught me how Indians look at their surroundings and how a German looks at the same surroundings.
[+] [-] educar|9 years ago|reply
[+] [-] MrBuddyCasino|9 years ago|reply
Sure there are some contributing factors (eurozone monetary policy, labour laws), but thats really the core. I feel like the education system, world class science institutes (Fraunhofer, Max Planck and Helmholtz) and pragmatic vocational training are really just a result of that.
[+] [-] patrickg_zill|9 years ago|reply
One time in an expensive hotel in Asia, there were a few times when things were simply wrong, even though we had a named person assigned to our group as a manager to call on.
I met with the German general manager and suggested that his systems for ensuring a quality experience were not correctly set up.
He sat up straight in his chair and told me that he would deal with all the issues we had. From then on we had no more problems with the account manager...
[+] [-] Gravityloss|9 years ago|reply
[+] [-] cafard|9 years ago|reply
[+] [-] unknown|9 years ago|reply
[deleted]
[+] [-] lima|9 years ago|reply
Many brilliant friends of mine who failed university or even high school did an apprenticeship instead.
Among them are CEOs, R&D managers and founders.
[+] [-] shriphani|9 years ago|reply
We got so much from the older model and I dare say people lived better lives while studying.
[+] [-] lacampbell|9 years ago|reply
[+] [-] da02|9 years ago|reply
[+] [-] gumby|9 years ago|reply
I am surprised by this assertion. Allegedly family-managed firms can make long term decisions, but those observations are always subject to survivorship bias. At best I would think this issue marginal. (There's also a bias in the statement, as inheritance tax in the US is quite low and kicks in at a pretty high level).
I would think if anything the ability to inherit reduces the likihood of outside ideas.
(And anyway, in a republic, inheritance is abhorrent. We don't need another aristocracy.)
[+] [-] CPLX|9 years ago|reply
[+] [-] friedman23|9 years ago|reply
In the modern age, making decisions based on feelings rather than statistical evidence is abhorrent. $10 million dollars is peanuts for a successful business and if the majority of the wealth is tied up in a business what you are in effect doing is destroying a productive asset of the US economy for short term gain.
Rather than using your misguided moralisms to decide policy we should use evidence to decide on the policy that results in the best outcomes.
[+] [-] devoply|9 years ago|reply
[+] [-] joelthelion|9 years ago|reply
How can you write stuff like that and stay serious?
[+] [-] mcv|9 years ago|reply
[+] [-] mjburgess|9 years ago|reply
I once read a book on mental heath by a professional academic who threw in something about how some irrelevant conclusion in the mental health field showed government was inherently wrong.
[+] [-] postgeographic|9 years ago|reply
[+] [-] apo|9 years ago|reply
[+] [-] stephen_g|9 years ago|reply
It's one of the major problems with the Euro... It was a terrible idea from the start, and situations like Greece were foreseen by economists like the great Wynne Godley decades ago (see Maastricht and All That, London Review of Books, Oct 1992). Unfortunately the mainstream of economics still doesn't have a developed enough understanding of monetary systems to have worked that out yet...
[+] [-] gumby|9 years ago|reply
[+] [-] KKKKkkkk1|9 years ago|reply
I don't see how this answers the question in the title. How does the school of mathematics of the University of Goettingen help make German factory workers competitive with Chinese ones? Why aren't these companies moving their production to cheaper markets like companies elsewhere do?
[+] [-] everybodyknows|9 years ago|reply
http://fortune.com/2014/10/22/why-germany-is-the-eurozones-b...
This is not something Germans -- such as apparently the author of OP -- like to talk about.
[+] [-] flohofwoe|9 years ago|reply
If you look at a typical German 'Mittelstand company', many look more like high-tec laboratories than typical factories from the inside, lots of robots, high automation, the people working there need to know the technology inside out, troubleshoot and fix problems quickly. That's difficult to get from a manufacturer on the other side of the globe who needs to juggle many different clients from all over the world.
And many German workers still have a certain loyalty to their company, since the company owner isn't some international celebrity CEO installed to squeeze the last bit of money out for 'shareholder value'.
[+] [-] bootload|9 years ago|reply
The search for precision and applied scientific discovery. [0] Enlightenment drives every aspect of German manufacturing. Factory workers are in an environment that makes things driven by these processes.
[0] An immediate example that comes to mind is the electric signal activation of the liquid suspension (magneto-rheological fluid) in the Audi R8. cf "The Audi R8: The Suspension" ~ https://www.audiworld.com/articles/the-audi-r8-the-suspensio...
This is an extreme example. It also highlights why Chinese/German manufacturing is different. One is aiming at mass market, low cost. The other high cost but desirable. The low cost German manufactured cars are measurably better than the Chinese.
[+] [-] mcthorogood|9 years ago|reply
[+] [-] WillPostForFood|9 years ago|reply
Regardless of the rate, there are big exemptions for the transfer of businesses in Germany that definitely give the the advantage in that specific case.
[+] [-] pcrh|9 years ago|reply
[+] [-] therealdrag0|9 years ago|reply
[+] [-] olivermarks|9 years ago|reply
Having said that they have a very good national business model and an excellent culture around vocational training and expertise building.
[+] [-] throwaway13337|9 years ago|reply
In other words, trade barriers strengthened the middle class.
[+] [-] anentropic|9 years ago|reply
- The most important difference is the continuity of the leadership. The leaders of the Hidden Champions stay at the helm for an average of 20 years
ok yes, could be
- the German history of many small independent states (until 1918 Germany consisted of 23 monarchies and three republics), which forced entrepreneurs to internationalize early on in a company’s development if they wanted to keep growing
there must be lots of countries where this is the case
- Scientific competencies also play an important role
there must be lots of countries where this is the case
- the unique German dual system of apprenticeship, which combines practical and theoretical training in non-academic trades.
ok yes, could be important
- Tax advantages are another reason.
skeptical
- the international openness of a society is an essential factor in the globalized world of the future. Germany is far ahead of other large countries with regard to mental internationalization
skeptical that this vague claim is true, let alone an important factor
I was expecting to hear something about https://en.wikipedia.org/wiki/German_company_law
e.g. "in companies with over 2000 workers just under half the seats on a supervisory board are selected by the workers"
seems like shareholders have less power and employees have more, under the German system, and it seems fairly logical that this could lead to long-lasting companies producing high-quality products
[+] [-] nom|9 years ago|reply
[+] [-] sandworm101|9 years ago|reply
[+] [-] GBond|9 years ago|reply
[+] [-] atlih|9 years ago|reply
[+] [-] luca_ing|9 years ago|reply
https://news.ycombinator.com/item?id=14261923 (I hope I'm linking the right thing).
Germany had a strong Mittelstand (and was indeed struggling with an uncomfortably strong Deutsche Mark) long before the Euro. I suspect it would have worked out.
[+] [-] lightedman|9 years ago|reply
It only makes sense such engineering capability would result in a lot of manufacturing work in the middle-class range.
[+] [-] panzer_wyrm|9 years ago|reply
Which are the valued blue collar jobs in US - doctor, chef, programmer and lawyer. That's it.
[+] [-] yuli67|9 years ago|reply
[+] [-] dx034|9 years ago|reply
The world could probably sustain even more companies that focus on long term growth and quality instead of quick products. But that's not how you become famous. You become famous by making a quick app used by millions that you can IPO a few years later. So that's what many people in the world try to achieve. Not building a small company over decades that specializes in something which most people don't even know exists.
[+] [-] unknown|9 years ago|reply
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[+] [-] boomboomsubban|9 years ago|reply
[+] [-] cowl|9 years ago|reply
[+] [-] postMarxist|9 years ago|reply
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[+] [-] martinborman88|9 years ago|reply
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[+] [-] martinborman88|9 years ago|reply
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[+] [-] postMarxist|9 years ago|reply
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[+] [-] nimchimpsky|9 years ago|reply
no idea what your saying