We don't need startups, we need Digital-Mittelstand
mertbulan.com
mertbulan.com
These do not scale to 30% of GDP in the same way high value B2B industrial equipment does (in manufacturing you happily pay $100,000 for a piece of machinery because it can turn inputs into more valuable outputs at scale).
Instead of coming up with incorrect ideas about what the government should “encourage” from the top down, what if European elites focused on cooperating more with their neighbors to open more opportunities and meanwhile let the peasants (the market) figure out the most productive and profitable uses of their time.
If Europeans can’t figure out new valuable areas where they can contribute to the world, than their system isn’t as clever or morally righteous or fantastic as they think it is. I believe if allowed the opportunity, the people would find this positive-sum value to be created. Who do you think founded all the Mittelstand in the first place?
Sadly europe never realized that low taxes, capitalism and liberty is what drives wealth.
I wonder if, in a generation, when the best brains moved to the US, asia and argentina, the continent will finally awake from its socialist slumber?
Hong Kong managed to go from a peasant village to a global financial center in a generation or two. In theory, it should be possible for europe to do the same. But in order for that to happen, there needs to be insight into the sickness, and awareness of the cure.
I'm happy I left. After I left high tax western europe I basically doubled my salary after tax! =)
Same for the Dutch, btw.
I want my country every year to be just a little better than it was the year before. If that's not happening and I need to resort to comparisons to failed developing countries to see it in a good light, then something is going wrong with it.
Honestly we have moved Europe so far past the post-political that I find it difficult to comprehend peoples politics nowadays. I wonder what people think "socialism" or "left" politics is now that everything has been so thoroughly depoliticized, I genuinely don't know. Is the EU "left"? I guess so? Is the IMF?
By the Overton window of Europe, I think the Democrats are "dangerously right wing, look at them being pro-gun". Certainly they are to the right of my personal Overton window, though perhaps I am projecting my own views on my fellow Europeans.
Republicans of faint heart should avoid finding out how Trump gets labelled on newspaper front pages around here.
China: 33%
USA: 34%
Germany: 50%
Economically, modern Europe is more communist and exerts more centralized control than China. Might explain why the current class of European elites have presided over the greatest destruction of an industrial base since the Soviet Union.
Most Europeans have access to some kind of comprehensive public health offering, food that isn't killing us quite as quickly as American food does, etc. It is a system which requires thought and design that markets can't offer, since they're innately uncoordinated (the exception being oligarchies).
The idea that the market can be described as regular people deciding things is, by the way, fairly funny. We don't get to choose what gets made, and have to select from a buffet of often pretty poor options served up to us by people who are by and large not interested in anyone's wellbeing but their own.
Most of Europe recognises on some level that not everything that counts can be counted. That's the real difference. Regulation of new, high risk industries makes perfect sense from that perspective.
Is Europe more communist than I thought? You do realize if you aren't happy with the options on offer in the market, that's an opportunity for you to provide a valuable service to your fellow humans...and yes improve your own wellbeing at the same time...which is the point of a market?
Who do you think started all of the German Mittelstand companies in the first place?
And if the customers are not willing to pay more, it sounds like they're actually happy with the current offering and that's not an area that your fellow humans would find useful for you to work on.
Yes, one of the responsibilities of a founder is fundraising. If you can't sell people on investing in your vision that is...a somewhat bad sign.
People would need to have perfect information about all the products they buy in order to truly know if they're happy with them. If they knew and saw first hand all the effects that a product has (poor working conditions, poor pay, environmental destruction, effects on health, etc) they might not actually be happy with these products. It's impossible to research all of these things on everything you buy, and therefore the market does not "care" about any of these things, only about the immediate effects that the buyer can feel.
But I think more often people delude themselves into thinking their thing is better (since it's their baby) when it actually is not, which no amount of marketing dollars can solve.
A rebuttal of "markets don't work because monopolies might form!" doesn't make sense when the alternative is to make everything a monopoly in the form of top-down government control.
Even the Chinese Communist Party understands that markets are the best way to create value and growth.
Maybe in terms of the number of companies, but in terms of percentage of market size, I'm not sure. Literally the entire social media adjacent market at the moment, including instant messaging is about offering a service below cost, killing any chance of non ad supported platforms.
> And if the customers are not willing to pay more, it sounds like they're actually happy with the current offering and that's not an area that your fellow humans would find useful for you to work on.
Not necessarily. This would be true in a world of spherical cows and rational consumers, but that's never going to be the case. There's other considerations like walled garden lock-in and network effects that consumers have no control over.
> Yes, one of the responsibilities of a founder is fundraising. If you can't sell people on investing in your vision that is...a somewhat bad sign.
So it's not about "just go out and build a competitor", but something much more complex, as reality usually is. Even access to venture capital can differ by orders of magnitude between markets.
Yes, markets are democracies which are messy and complicated and competitive and hard and not as easy as issuing top-down decrees from the elite.
In the short term irrationality can and does prevail in both markets and democracy. In the long term, the best product and ideas always win. This is why both democracy and markets are durable.
Paraphrased differently, this is the weak-form of the efficient market hypothesis. All decentralized processes have some level of gravitational pull toward efficiency. They're not perfectly efficient, obviously. But they trend in that direction on long time scales, unlike the alternative which is being anchored only to the whims of the fickle elite.
If there’s anything to learn from recent developments it is that democracy is fickle and definitely not the default state. But to me you’re still conflating commercial product success with the product being good or bad. If it was about the product, fundraising or marketing shouldn’t be among the biggest obstacles, since they have nothing to do with product quality or consumer benefits.
Tha tis true, as they won't survive.
However an established company often has the ability to go on a price war, including selling under cost temporarily, to fight off an up starting competitor and preventing it from entering the market in any serious way. Once they give up, one can go back to higher prices.
Thus only one who can compete is somebody who can use profits from other area, thus some already well established player in a related market.
Maybe you can grow it to 30% of GDP if you start doing a bunch of bad stuff, but if it can be replaced by open source local stuff-- if it's possible to simply kill facebook, Microsoft etc. and replace them with Linux together with a couple of not incredibly expensive software packages developed to provide a substitute, then why should we have a big-software economy?
I think this is more the idea. The interesting thing isn't to build a European Facebook or an EU SaaS economy, it's to kill the whole concept, globally.
Secondly, the idea that you can just replace the entire software industry with Linux is... Are there even words to describe this? Linux is just an operating system. You can't replace a whole industry with "a couple of cheap packages."
Somebody remember elgg? Or buddypress? None of these mega cooperations have software that can't easily be copied.
Basically, to go after the easy 90%. Then we go from a world with data in the cloud, massive advertisement statistics gathering etc., to a world where people mostly use computers to solve concrete physical problems in their environment and where networks are distributed, e-mail like or like a facebook where every participant stores a substantial amount of information locally in plaintext and has it interpreted by a desktop app, where he has no feed with the content decided by others, but chooses what he has the computer show him, etc.
Just look at telecom. How much complexity in the protocols isn't there just because people have to have their resource usage monitored so they can be billed for it, and for this to be settled between telecom companies?
The software to kill SaaS and Facebook might be so simple that a couple of people could write it by themselves. It's like that local government 'if you have regional govt they decide it all in Nottingham probably in a couple of meetings. Complete amateurs.' That's where I think we could go, but with software instead of the UK civil service.
It also fits really with with the coming of LLMs etc. You can just store of a lot stuff in plain text and have this super-fast reader process it all. Instead of lots of software, just huge amounts of plaintext that the machine can understand.
Today's version of the HN classic "no wireless, less space than a Nomad, lame" (on the launch of the original iPod)
Look, we know that the software to kill Facebook is indeed so simple that a couple of people could write it by themselves… because Facebook itself was written by Zuckerberg and four friends while at university.
The "software" part of this is not hard. It's everything else that is hard.
Switzerland already has a policy that all government agencies need to use open source software so the policy I mention isn’t a pie-in-the-sky theoretical.
The US might always dominate software (which could turn out to have no moat) and China might always dominate manufacturing.
But neither industrialized manufacturing or software even existed 200 years ago. I'm pretty sure we haven't hit the final destination in human history where there's no problems left to solve.
There's this one weird "AI" thing people are talking about. Could be something people find useful you could work on?
They literally build machines that everybody needs to live. They make everything, all sorts of little of bits you need. If you need a special chemical reactor that resists some weird thing, it's probably from Germany.
https://en.wikipedia.org/wiki/German_economic_crisis_(2022%E...
Germany has problems-- immigration, energy etc., and maybe some companies have problems, but the US has put huge efforts into making something even a tiny bit like the German companies that are actually building stuff, presumably because its leaders know that you can't eat software services no matter how overpriced they are-- in the end actually building things is how you get things, once you are no longer forced to get some critical vitamin through trade, and we are there now.
And you can't eat lenses either, and people who do grow food also use software, and so do everyone else that makes about 90% of all the other stuff other than food that constitutes the German economy.
https://www.statista.com/statistics/509215/food-industry-imp...
[1]: https://wits.worldbank.org/CountryProfile/en/Country/ZWE/Yea...
[2]: https://wits.worldbank.org/CountryProfile/en/Country/ZWE/Yea...
If you think Germany is anything close to a failed state then all I can tell you that you either fell for lies or intentionally spread lies yourself.
They can as well make insulin $1000 a pop, so everybody with diabetes will need to pay more, GDP up!
Oh wait, Germany doesn't even have a huge chunk of their population with diabetes because Germans don't live off mountain dew and cheetos...
Definitely, Germany has no future!
People have been saying this for twenty or thirty years, and in the meantime the economy has coalesced further into fewer American megacorps. It's a mirage. Things do not work that way.
(AI is going to be exactly the same: the huge corporate valuations are predicated on there being exactly one big AI company which takes a significant chunk of value from all word-based work being done today)
The US government threw the book at Microsoft in the 90s when tech was a small slice of the US GDP and it had no international competition, but today the tech sector is the biggest engine of GDP growth in the US, so there's no way the US government is gonna throw a spanner in that just to be richeous.
In the current economic and political climate, having a monopoly on monopolistic giants like the US does, is much better than having no monopolistic giants like the EU, since nice guys do indeed finish last.
A European FB or alternatives for literally every US Big Tech product already exist, all of them OSS.
Even search (Google) now became much easier to replace with LLMs.
What it misses is solving the chicken and egg problem, basically getting people to use it.
Without its people, social networks are useless. The same is search.
I don't think it follows that unprofitable things are by definition not clever, righteous, or fantastic. This seems like a blinkered, American-capitalist viewpoint.
Things being clever, or righteous, or "fantastic" (whatever that means) doesn't mean that people actually value them. That isn't what value means. Something is more valuable if you would give up more to have it. It is less valuable if you would give up less to have it.
Basically, no, it is in fact definitionally true, not blinkered, and has nothing to do with America. All of Europe is just as capitalist as America, Britain, Australia, New Zealand, etc.
Try betraying your partners trust and cheating on them - or refuse to take care of your children. They will likely be upset that you aren't holding up your end of the bargain.
Just because you haven't placed a price tag on your relationship and hate the idea of thinking of it that way due to modern cultural ideas of romantic love, doesn't mean relationships are not a transaction (historically in fact they did carry a price tag).
So your police, firefighters, the military, health services (not in the US though) and various charities are not valuable? That is an interesting take.
The fact that the state may provide the majority of these does not mean that they are not profitable as private ventures. Why are they profitable? Because they are deemed very valuable!
Please re-read the comment you replied to with this context in mind (as their excluding the US was for this reason; though of course the US is not the only country foolish enough to allow profit motives to harm their healthcare, firefighting, etc. services) - the fact that some countries choose to allow profit extraction through these services does not mean that the non-profit versions have no value.
You are completely missing the point. Whether a type of service has a state monopoly and thus no viable private market is also quite irrelevant to the general point.
The general point is that people (i.e. "the market") are willing to pay for things they find valuable but not for things that they do not. That includes paying through taxes though because the payment is indirect it is more likely to not perfectly align with "value".
The fact that some healthcare in some EU countries involves profit is irrelevant to my point & the point of the original comment you replied to. Neither of us were saying that the EU is a shining example of profit being out of healthcare (and in fact I was clear to state that the US is not a solo example on that side of things).
The claim we are disagreeing with is that profit = value and therefore lack of profit = lack of value.
Take UK firefighting services as an example. They are publicly owned and funded by taxes, and as such they are not designed to extract profit, just to be funded enough to provide the services needed. Does this mean they have no value? And in a hypothetical world where every country decided to shut down all private fire fighting companies and to fund publicly-owned ones, would that mean there is no value in any firefighting worldwide?
In my experience, people who argue against this model and in favour of for-profit businesses providing these services say that the profit motive leads to better efficiency, competition etc. (which I personally agree with, but that's a separate conversation). I don't think I've ever before seen anyone argue that lack of profit means they have no value.
People are willing to pay for those services (and they do through their taxes as a result). People are paid salaries to provide those services (that's a basic form of profit). There are many commercial companies that provide equipments and even services to tax-funded firefighting services. So there is indeed "profit" everywhere. That is the big picture.
> I don't think I've ever before seen anyone argue that lack of profit means they have no value.
That's odd because it is a really basic concept.
In general socialised services (education, healthcare, firegighting, etc) are so not because they aren't valuable or profitable but because we think that they are so important that everyone should have access to them, even those who can't afford them.
In the US houses are often build from wood and plaster and have a high chance of being knocked down by a storm. Companies in the US are often build on a ton of dept (and never making a profit is not considered "weird") and have a high chance of being knocked down by a storm.
In Europe people like to build houses from brick and concrete. Companies in Europe are often expected to be profitable at some point and be able to wither a storm.
Same for oil. Same for e.g. the UK steel industry. I think people underestimate the extent to which the EU either doesn't have the same level of natural resources, or has used them up. There's a reason the last time that Germany got serious about resource independence it tried to invade Azerbaijan despite the USSR being in the way.
If you want to dig deeper, this is a consequence of America beginning in recent history as a frontier settlement, primarily attracting aggressive, adventurous go-getters to make their fortune. Extracting for personal gain was baked into the culture from the beginning and is an artifact that has persisted to this day.
I think this is a great analogy to explain the issues to this crowd, although I think there's also a lot of people here who would happily break userspace. And it's successful in a financial sense.
American businesses do the same thing businesses do anywhere: try to generate more valuable products and services than they consume. It really is as simple as that. No value is "extracted" when you sell bread for more than it cost to buy flour, yeast, water, labour, and space to work. The idea that it is "extractive" screams to me of the lump of labour/labour theory of value idea, which is not just wrong but incoherent. Maybe that is not what you meant, but it is common for communists to claim that "all profit is extracted from workers' labour" and similar silly rubbish.
This isn't about communism vs. capitalism. It's about Airbus culture vs. Boeing culture.
An alternative analogy is "binary search" versus "linear search".
With linear search you don't risk overshooting your target, and it's less chaotic, but you also don't progress nearly as quickly.
The article lists 4 things under "What Should Be Done Next?" - Given your don't I think I can also be a bit snarky and ask: Have you read the article?
From the site guidelines:
"Please don't comment on whether someone read an article."
Exception is R&D for the most part, but here these tendencies seem to be growing as well. Insane amounts of money are wasted to evade tech as much as possible.
This has changed from only a decade ago where there was much more enthusiasm for tech. Now people are annoyed by it.
For example Würth is the world leading producer of screws. I think it's a good example of how a lot of these companies make parts. But what are the parts in the digital world? It's libraries and frameworks, and nobody is paying for those.
Also the values you mentioned: excellence and stability. That's exactly what we see in libraries. Everybody wants stable APIs and the library to get out of the way.
Maybe another angle to look at this can be "parts" for a knowledge-based company. Like a software to model and simulate financial products or insurance risks, or - as the article mentions - complex 3D models. I have also already seen companies working on digitazing factories, digital twins etc.
If there's no market for libraries and frameworks (like there used to be), the next best equivalent appears to be SaaS and software you can buy and run/host yourself. Germany seems to be doing pretty good there, considering SAP.
The problem I see is primarily that most software businesses aim to get out of their niche. I suppose a screw maker is perfectly content just being the number one in screws. A software business is rarely that focused: Better to do a lot of things OK than one thing great. Marketing and sales are the big levers, not quality. Probably because software is largely being sold to people who can't even judge their quality and mostly buy based on vibe. Software is, after all, a pop culture.
So if every piece of software gravitates towards being everything for everyone, and if marketing (money) is the big lever, it's a lot more of a winner takes all environment. That's an excellent environment for strong hustlers. It's a terrible environment for quiet people that care about quality.
In essence, all software is a service; often legally even. But for this we'd need to look at software that's "shipped" to all customers in more or less the same form. But is also not a full blown end-user product. Taking that, we can look at "parts" or even "partial products" as:
* B2B SAAS services. From microservices to large services. From API-only to full blown UI based. That reservation system for nail-studios or the extract-PDF-to-our-bookeeping-API.
* B2B Mobile apps. E.g. a scanner-app to help with packaging or finding in a warehouse. Or a PoS for restaurants or shops.
* Hosted versions of FLOSS software. e.g. nexcloud, mastodon, matomo, a ci-pipeline, SIP, LMS, CMS, etc.
* Managed common PAAS parts. Managed Postgres, managed LDAP, managed CI, managed firewall etc. Not on-prem (that would be services) but more like AWS, but then from local "Vendors".
* Plugins and micro-saas. Just look at the amount of paid-for plugins in shopify, salesforce, google docs, github-marketplace etc. etc.
Almost all of these could be startups. But have a very restricted TAM. So they'll remain small. They also don't deliver a full-blown end-user-product, but something that's built on top of other common IT components. They often have very localized focus (a common restaurant reservation in France is very different from a reservation in the Netherlands, for example), often have a benefit from being trusted on a human level (I'd either backup my companies data to some FAANG, or to that one guy that I know and has been servicing my company for the last decades very well already).
But most of all, they are too small to become scale-ups in the "silicon valley" sense. Because in doing so, they'd loose all that makes them valuable today.
(Source: I've worked at or on many such "startups" that would forever remain small but big enough for the founders to get a solid income from)
Even Romania has better infrastructure!
Source: https://worldpopulationreview.com/country-rankings/internet-...
Although people rave about 1gb, I don't pay for that much as I have no need. I am not downing Llama every minute. A reliable 100 is plenty fast.
Neither can we... :'(
And yeah, Romania might have better Internet in some places with high population density but certainly not in the more rural areas, there was a big EU project (RO-NET) to help them get that up and running in more places in the last 5 years. In Germany you can get fiber connection in most cities as well.
Don't get me wrong I love faster Internet myself but don't pretend like that is a chief reason why Germany can't have IT startups, we have some of the best connectivity and peering in Europe with DE-CIX and the hub in Frankfurt.
How long it takes to upload 500GB video, dataset or docker images on 250/50mbps DSL line? 24 hours in theory! Like two days in reality!
On 1gbps it is 1.3 hours in theory, about 2 hours in practice!
I understand that most people do not need such connectivity, but for many people it is question of staying productive and profitable. I work in remote team, and we do share such data quite often.
DSL line is good as a backup, but it is useless. Perhaps I could deal with limited speed. But latency and throughput goes to hell when under load. I would have to pause all other traffic while making calls!
In Romania I have 4 plans in single flat. Fiber, ADSL, and two unlimited (like no speed throttle) 5G SIMs. About 90 euro monthly.
Ha ha ha! No.
The option we have in my neck of the woods is 4.5 Mbps/s, via DSL. Take it or leave it. And were are talking about BW, in a place where the average 100 m2 house is being sold for 500'000 €.
> (or let's say they are not willing to pay 50-100 € per month for it)
Good that the criminal prices of telecom providers are being mentioned. "We are cheap!" Vodafone was advertising lately on the radio. Yeah, for 50 € per month for a DSL connection with a 2 year contract. No, that's not cheap, that's extortion. And your advert is called gaslighting.
Fun story. In the previous village were I was working, the only way to get semi-fast internet was via Vodafone LTE (for a nominal fee, of course..). Then the region awarded a grant/bonus for the first company to bring glass fiber to the area. All at once, 3 different companies were scrambling and pulling glass fiber to try to be the first ones to provide coverage. They now have 3 different glass fiber providers there.
Quo Vadis, wirtschaftswunder? Werden wir es wirklich schaffen?
1. Salary Grants => SEED / EXIST stipends
2. Simplify Bureaucracy and Regulations => Who doesn't want that?
3. Expand VAT Exemptions => Council Directive (EU) 2020/285 will bring this law: "For SMEs conducting cross-border transactions, a cumulative turnover cap of €100,000 across all 27 EU member states applies"
4. English Language Support => I'd say most of the EU is already pretty good at this.
Not Germany though. I don't think that's as easy to change as VAT changes. And since a bunch of their examples are primarily B2B, they wouldn't care about VAT changes either.
European leadership and a fair chunk of the population. They're the ones who bought it in, if they didn't think it was worth the trade off they wouldn't have instituted it.
It seems like just yesterday we had people lining up to praise their bureaucratic takeover of iPhone charger design, for example. If the EU bureaucracy has time for that, what matter is too small for them to be involved in?
Similarly, I expect user serviceable batteries to come to an iPhone near you at some point, in the name (quite reasonably) of environmental regulations.
That is the thing with bureaucracy; it isn't there to help people run just-acceptable privacy violating businesses. It is there to squelch the ones that are unacceptable. If you want the EU to write an acceptable business plan it'd be "don't start this business, it might violate privacy". And there does seem to be support for the EU regulating in that manner. I haven't met many people who are pro-privacy-violations.
Sure, and that's why there's far fewer EU startups.
And the result is that they get exactly what they asked for: people not operating businesses that they otherwise would have, because of onerous, burdensome, complex, bureaucratic and uncertain rules.
Any business can "violate privacy" because the EU has made up a definition of "privacy" that is totally absurd. It created from thin air (with no public debate) the idea that information about you belongs to you. I say that is rubbish.
Privacy used to have a clear and narrow meaning. It meant freedom from interference with your things. It meant the state could not break into your house, set up cameras or microphones, snoop on your documents, read your mail, or listen to your phone conversations.
Somehow we have a world where we are under constant CCTV surveillance by the state (Britain is the worst for this but other states aren't far behind, and are all very bad) and that is supposed to be fine. But if you contact someone's previous employer to ask your opinion of the employee, without the employee's permissions, you have "violated their privacy". This is because a "privacy principle" is that if you "collect" "personal information" about someone, you should collect it from them, directly, except with their permission.
Nobody understood "privacy" to mean you couldn't do casual reference checks until 5 minutes ago. Now it is supposedly a fundamental human right!
Even if you were confident you were within the bounds of privacy law when you started your business, by the time you get off the ground and start making money they'll have expanded the definition of "privacy" to encompass something new. It is completely reasonable for people to choose not to bother with all this crap, IMO.
The fundamental thing behind this is revealed by your comment, actually:
>And there does seem to be support for the EU regulating in that manner. I haven't met many people who are pro-privacy-violations.
Exactly! The word "privacy" has strong cultural power. If you can put your pet concept into that category by stretching then idea to breaking point, people will support it by accident. People care about "privacy" because they care about privacy (the real, coherent, original concept). They mostly don't even realise how much the term has been twisted and changed over the last 10 or so years. If they did, they either would change it back or they'd stop caring about the term. Because, remember, words are just labels. In the long term, this language twisting shit doesn't work. In the short term, though, you can trick people into supporting things by calling them "privacy" or "human rights" or "equity" even though those terms didn't mean, even 10 or 20 years ago, anything like what they supposedly mean today.
"Mittelstand conditions" are replicated for digital products/services that are 1) expensive to build, 2) are very useful/profitable for customers, and 3) have small/fixed addressable markets.
More sustainable examples would be engineering consultancies building embedded systems for infrastructure, machines, robots, etc.
They have been Apple-only for 15 years.
If they wanted to rule the world, they would have transitioned Things to the web and to Windows.
To do that, they would have had to hire three times as many people.
It's easy to imagine an alternate timeline in which CulturedCode had spent the past decade 'enshittifying' Things.app to rake in more money.
Exactly why they're still great. It takes courage and conviction to not grow.
Looks like the different apps (desktop, mobile, iPad) have different prices, but all are one-time payments of $10-$50.
I bought it years ago and IIRC it was just $50 for everything then.
But you are right that Germany's SME subsidiaries generally follow the EU definition: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A...
I don't know if there are loopholes and if SME subsidiaries end up benefiting large, established players in the end.
"mitte" is the middle. Those are companies that are contempt with an average size, they don't strive to grow. (Or to "go big or go home", like US VCs would advise.) Also, "Mittelstand" companies are usually family-owned, which means that the CEO cares much more about being able to pass the business on to his kids on 20 years, than about raising today's stock price with buy-backs and dividends. And especially so if you have a niche provider that keeps offering the same services for 10s of years, is run by a tight-knit group of relatives, and cares more about quality than profits, those will proudly advertise themselves as "Mittelstand".
The article comes across as naive and idealistic. This was especially odd: "The average German—apart from those who’ve left the country and morphed into “tech bros”—isn’t particularly moved by shareholder value, especially when the Basic Law of Germany begins with “Human dignity shall be inviolable."
I agree with the proposoal to simplify and regulations but this is easier said that done because these are cultural aspects.
The idea that you should be able to start a business without risks or hard work is also perhaps more part of the problem than of the solution:
"A government program could provide salary grants based on experience, allowing these individuals to dedicate time to developing a digital product without compromising their quality of life or financial stability.*"
I would also think that someone who lives and work in Germany ought to be speaking German and would not require the German state to provide paperwork to start a company in English.
Lastly, regarding VAT exemption thresholds we perhaps need to look at the root cause of those exemptions and calls for higher thresholds: VAT rates in Europe are ridiculously high and that is in turn caused by the size of the state.
Not everyone thinks they should ruin their health and have no personal life for a 0.01% chance that those stock options are worth something.
> I would also think that someone who lives and work in Germany ought to be speaking German
Newsflash: there's an European Union with the right to work and live anywhere inside its borders. They speak a couple different languages in there already. What's one more?
Wow what a great way to invite even more talent to your country
If you move to Germany at some point you need to learn German, don't you?
"At some point" - absolutely. What bothers me, and this is visible in every layer of German bureaucracy, is that you're expected to be fluent in it from day one, navigate paperwork like a native, otherwise you'll be frowned upon very quickly. Now add to this the talent that wants to move in and start inventing or kick off a startup. Not gonna happen. Ohh, and not to mention German archaic view on education and workforce (non)mobility between sectors if one chooses so
The expected, normal way is that a foreigner adapts, not the other way round.
My favorite example is Beyond Compare. Pay once for the cross platform app and get free updates for each minor version, then you get a discount if you want to pay again to upgrade to the next major version. Or Plex Premium.
As a SW dev I can empathize with your PoV, but from the perspective of an end consumer, I don't care about the externalities of the manufacturer of the product, I only care about value for my money.
When you need to buy a new t-shirt, do you go and buy the one from the manufacturer that feeds the most families or do you buy the best value one from the nearest Walmart/Target/GAP that fulfills your needs for the best value (most likely made in an Asian sweatshop)? That's how most consumers think, including you.
The costs, risks and dependencies of the manufacturer/vendor are irelevant to the end consumer, that's the cold harted calculated truth of how the free market capitalism works, and how it decides who lives and who dies.
As is the desire from the customer for a one off purchase.
What happens if that well-paid engineer decides they no longer enjoy software development? What if they need more than a year to deliver results? What if they produce something useless for the market?
This Keynesian approach is full of unknowns—it looks great on paper, but we've already run these experiments in the past, and they simply didn’t work.
I think the more interesting aspect is funding: if you tell a VC that you're aiming to become market leader in a small niche, they hear "no outsized returns" and go looking for riskier ventures.
But there is an existing funding ecosystem for small businesses that don't expect to get big, I guess mostly bank loans or bigger companies financing new suppliers. I wonder how open those are to software companies.
I would guess it's mostly relatives and/or savings. Banks aren't interested unless you have some kind of guarantee you can borrow against.
I do disagree with the work-life balance part, I struggle to see how you can build something (and maintain it at such a high level) without intense focus and commitment.
Basically the same story with food corporations. Dozen companies provide food for whole western world. Cars? Toyota, Stellantis and Volkswagen with their sub-brands provide cars.
Economy of scale is the thing. And it will kill Mittelstand. It’s already happening. Large purchasing power gives another price during negotiations. Same sales people will sell dozens of products instead of mittelstand’s speciality. You only need accounting once. As well as HR. The Mittelstand must be very highly specialized to be untouched by global mega corporations. There is also no life-work balance in the process when working with mega corporation. It will squeeze the resources out of Mittelstand just by the size difference. The Mittelstand I work for is already lost with all the EU paperwork providing reach, rohs, sustainability and battery Verordnung documents to the customers.
I'd love to see that but the trend is in the opposite direction. It's not just technology either, there has been consolidation across most industries.
Self-serving prattle if you ask me.
German cars have notoriously bad and buggy infotainment centers. Germans do of course release half-baked products (like literally every other country). German cars don't even get patched. The built-in navigation system is useless and broken the day you buy your shiny new BMW and it will still be broken and useless by the time car goes to the scrap heap a decade or two later.
When BMW decides to a subscription model for heated seats is that not shameless profit seeking? Or is BMW somehow not German?
> Basic Law of Germany begins with “Human dignity shall be inviolable.” The entire culture fundamentally opposes many hallmarks of the typical startup ethos.
Germany is unable to build first rate tech businesses because -- wait for it -- Germany has superior culture. Give me a break.
> If you’ve ever worked with Mittelstand companies, you’ll know that many have a long queue of customers waiting for their products. It’s not uncommon to wait months—or even years—for an order.
This attitude is why the German economy has been shrinking for two years straight. Chinese businesses also do high precision machining and they do not make their customers wait for years. The belief that you can coast because competitors will never catch up is pure German arrogance.
The reality is Germany will loose badly if attitudes don't change.
The thing is that now many countries can process metal precise enough to satisfy customers. Maybe it’s only 75% of German quality, but at 40% of the price it’s unbeatable. Looks like, that German companies are sabotaging themselves. Volkswagen and defeat device. Bayer and Monsanto acquisitions. I have no explanation for this. Maybe as you say German arrogance.
It's easy to blame outsiders -- migrants, Chinese, Americans, Russians -- for problems that Germans brought onto themselves. It's exactly this belief in German cultural supremacy that makes serious introspection impossible.
I think there is a growing Digital Mittelstand in Germany already. I myself work for such a company. We have some strong VC-backed competition. So far the company, self-financed, fares quite well.
I think the author misses a plethora of B2B markets when coming up with examples. There Mittelstand can be a very stable, (if desired) regional long time partner.
Super interesting niche products, that were crucial for people's day to day work, sustainable work pace, always shipping interesting features every other week. A lot of focus on quality (the QA:Dev ratio was 1:1 in one of those for example).
A lot different from the "we must rule the world or die" from regular startups outside Germany. Incidentally one of those companies I was in just died, after getting from 50-90 (when I was there) to 900 employees. I'm glad I left before the decline.
Some of the ideas the author is proposing are already happening in Germany. There are grants to develop games for instance which pay you a monthly salary for 1 year and a while back there was a similar one for open source projects.
I've done the math for a document segmentation pipeline that every RAG system needs and you'd be able to get one off the ground for around $2,000,000 USD and be rolling in cash instantly. Good speaker diarization is another family of models that will print money once solved, but again, there isn't the possibility for hyper scale.
Meanwhile at least a dozen companies I've spoken to have wasted on the order of $10,000,000 trying to solve these problems in house and failed.
And I agree, there's probably a market for reliable, local services for some services. In the same way there is desktop SW from companies you never heard about (and far smaller than Amazon) doing things you never imagined were a problem
Dumping is illegal in a lot of commodities markets and physical goods industries but it's standard operating practice in software. It's hard to even imagine how different the software world would look if dumping were at least regulated.
But say I have an idea for a business, where the total number of customers worldwide is 100. The max number of employees ever sustainable by this business is, say, 50. But to reach that would take 20 or 30 years of organic growth , maybe a bit less with huge investment. It's what most businesses look like. It's not going to attract a ton of startup money. But it's also not going to be out-competed by a startup.
Small companies compete by making money. Even a modest amount of money can be sustainable. If you can get to about half a million per year in revenue (enough to employ a few people), a small group of people can get a lot of stuff done. That sounds easy but it's not. The first few hundred thousand revenue are really hard. You are dealing with customers that are demanding results, haggling over pricing, and facing the brutal realities of product market fit all while you are running out of money and time. That's what building a company means. Early success is very fragile.
My pro-tip to startups is to stop calling yourself a startup as soon as you can. Set yourself apart from the wannabes. People will take you more seriously. And the last thing a potential customer wants to hear is that you are this cute startup that is still figuring things out. That just sounds super flaky as a sales pitch. They don't need to invest in you; they need to buy your product and for that they need to believe in your product. And your product had better do it's job or they'll want their money back. If you make money, you should be wary of investors. And if you don't, even more so. There's no such thing as a free lunch.
You're a company that's making money, that has a plan, that knows what they are doing. The sooner you believe that's true, the sooner you'll make your company a success. Most startups have none of those qualities.
A simple EU regulation that requires offering real-time distribution of user data to third parties would massively level the playing field.
In Australia, Canada and the US I can open a company in about 30 minutes from picking the name to opening a bank account I can get money into.
In Germany the last time I tried it was about 7 weeks.
And that the "easy" part (as we know that it could be done as quickly as in 30 minutes) takes forever does not speak well of the UX of managing a business on that country, because e.g. closing a business, which is by nature more complicated, could end up being a hellish ordeal.
If you want to found a limited liability company (i.e. GmbH) you also can start with picking a name and opening a bank. Add "i.G." to your company's name (i.e. GmbH i.G.) and start doing business.
Both approaches require you to register your business somewhere down the line, foremost for tax reasons. And yes, this can take quite some time, I had one occasion where we waited for 16 weeks after filing, but did business all the time. Note that some services are unavailable to you as long as your company is not formally registered, e.g. insurance.
If you are in a real hurry and need a running limited liability company, just buy one. Better tax advisors usually have a few "empty" GmbH in their files they sell you for the price of capital stock plus some handling fees. This gives you all required IDs immediately and you just have to transfer the bank account and, if you want to, change the name. Depending on the availability of a notary, this can be done in a few hours but usually takes a few days. One additional advantage of buying a shell is that you get history, which makes a lot of things easier.
IMHO, the British approach is more pragmatic: Why would you not make it as simple as possible to incorporate and run a company?
Ultimately the state should make it as cheap and straightforward as possible, get out of the way basically, and let people get on with it. It's difficult to find a reason to do differently
This is absolute nonsense. In the UK you can open a limited company with 12GBP in a matter of days. Oh and it’s completely online, something which Germany will never have in the foreseeable future.
I'd say in Germany for starting a new GmbH you'd need at least 4-5k set on the side for lawyer/notary/accountant fees, this can be deducted from the 12.5k/25k bank account but it's a pain in the ... for the average startup.
Can you provide more details about this? How is this a problem and why does it affect startups?
[1] https://www.sup-kanzlei.de/fileadmin/user_upload/Scheinselbs...
Effectively... "Don't work as a freelancer for a company if they are your only client. That's employment."
[0]: https://www.gov.uk/guidance/understanding-off-payroll-workin...
One of the most important rules in Germany for startups: Employ as few people as possible. And I am not joking.
It's actually surprisingly easy to still fire people, you just have to have valid reasons: employee didn't come to work, employee works badly (Schlechtleistung), employee yells at customer, lack of work to do at the company etc. You just have to create the paper trail and follow the clearly defined process for firing (i.e. it has to happen at least two times, and you had a stern talk with the employee about it (Abmahnung).
You can also still fire employees without given cause in the first (up to) 6 months of employment.
What you definitely can't do is discriminate against employees, e.g. fire pregnant women because they are pregrant, fire migrants because they are migrants and so on. You have to have an actual, factual cause.
Also let's be clear with the concept of Scheinselbstständigkeit: This is simply a hedge against companies engaging in tax fraud by pushing people to be self employed when they really aren't. Scheinselbstständigkeit only triggers if a person gets over 80% of their revenue from a single customer, over a longer time, and has other things that hint at employee status, e.g. an own desk and company mail account, has to ask for holiday and so on. Simply having a large contract for e.g. 4 months with a single customer won't trigger Scheinselbstständigkeit.
In reality you just cant say that is the reason. If you fire the pregnant woman within the first 6 months you conveniently don't have to say anything.
You also get the inversion, we have to fire the migrants within 6 months.
I think the argument was that if someone worked for you for a few years as a freelancer and they suddenly become your employee you might be stuck with each other. Firing them will be much more suspicious. What to do with the other clients now that you are employed?
What is also kinda lame about the uncertainty is that freelancing may require much more dedication and working strange hours that might not even be legal as an employee.
I don't know what the solution is. Perhaps we need to merge the different formulas and adjust the salary.
If you run a society like that, you immediately face a problem: people try to get around the employee protection measures by relying on the gig economy, by hiring freelancers or by starting small companies.
So, the German tax agency has the additional authority to crack down on that. If you work freelance or run your own company, you need to always have several customers. If your only customer is a single company, the tax agency argues that you aren't actually a freelancer/small company, you are a de-facto employee of that company, and the two of you are violating several laws and owe back-payment on several employee benefit systems. Also, that's fraud BTW, here's your case number.
All EU countries have these perks with some variations between them. Only the "hard to fire" part varies more.
Don't forget that outside of Europe, most big economies were built on the ongoing exploitation of the working class. I am not saying this didn't happen in Europe, but at least there are efforts to curb this.
So a CIO complaining that he can't exploit people for cheap labour is not an argument for broken IT laws. It's an argument for seeing that it works as intended.
Most states in Europe treat you like you're mister money bags for anything above 50k a year.
You can choose:
- Cost of living (read Housing)
- Taxation
- Income
Government's need to curb one of the first two or boost the third, otherwise people will always be looking for the exit door.
On the topic of mittelstands vs startups - I think it's a non issue. You can have both. However, startups are starting to get a certain smell to them. Probably swearing in church here (hello ycombinator) but too many startups feel unreliable and the amount of founders just looking for an early exit is really not helping.
Large upfront capital automatically means you chase profit or growth.
Just like McDonalds. Which is really what the SV model is if you scrape away all the whizbang tech bullshit.
There is a reason McDonald inspite of "scale" and "low price" cant feed the world.
Because of the cost of opening a new store and initial capital involved. US had that capital available (thanks to dollar hegemony) esp post Ww2. No one else did.
There is no German/Chinese/Indian version of McDonalds.
Why? Because people are used to running sustainable restraunts without high upfront investment cause there was no capital for it.
McDonalds runs profitably and grows usually at the cost of something else (easy to see what those costs are in mature markets where growth has stalled) just like Google provides free shit at cost of all kinds other things.
But watch carefully what happens to these high capital models if they cant produce profits or growth.
Many have been coasting over the last 2 decades and have captured entire market. But that period is over just like the period where the British Empire expands till it cant any further. A high capital process btw cause you have to pay your army upfront to go shoot the native feudal lord and take his shit. Once expansion is over and all the land is captured how long did it take for British East India company to unravel?
This is not true, there are lot of internationally successful fast-food chains, even the Philippines has one: Jollibee. They may not be as big as McDonalds but that's just because McDonalds had a few decades' head start.
Local businesses tend to get consolidated. There used to be lots of local sodas, now there's Coke/Pepsi. There used to be a variety of food companies, now there's Unilever vs Mondelez.
Just fining Meta and Google a few billions every year isn't enough. Need to either tax all that digital pollution they bring over here.
And now they clearly aren't our partners anymore. With China not sharing democratic values and wanting to invade Taiwan, and the US setting up a trade war against us and at the same time siding with our enemy Russia that has just invaded Ukraine...
We need to have our own tech, for everything.
Similar to what US is doing against China, we should have a strong position against both of them. And one that strikes close at heart in the US are the Big Techs.
It's hilarious that we don't let even Fanta be sold with the terrible chemical formula it has here in the EU, like they have in the US.
But when it's about manipulating people's opinions with the US's social networks and communication apps. We are ok with that.
I'm sure anybody nowadays can build similar software than Meta or Google did. Even now more with AI search being so good.
Rather than protectionism there should be the ambition to build something better or more suitable for the audience. This isn't hard at all. The US corps are trying to build something suitable for everyone which is much harder than a specific demography.
These other lines sort of felt like an idealistic version of Germany:
> However, if you’ve ever used a product marked “Made in Germany,” you’ll understand what German culture truly values: mastery of a craft and uncompromising quality.
> They’re not the kind to release half-baked products and patch issues later
Anyone who has owned a German car knows the idea of German quality is a myth.
What is OP smoking? I have a Bosch oven, Gigaset DECT phone set and a Fujitsu Siemens laptop, all made in Germany and their quality is complete bottom of the barrel crap, totally the opposite of "craftsmanship and uncompromising quality".
Chinese companies blow them out water to the moon and back in UX and build quality. The quality of recent German cars is also nothing to write home about. Full of cheap and hollow sounding plastics including premium brands like Audi.
The "Made in Germany" sticker is a myth for consumer goods and electronics.
It's oblivious most consumer goods are gonna come from very large companies since only those have the economies of scale to manufacture, sell and market internationally consumer goods at a profit.
Mittlestands mostly cater to niche products or local markets where there's less downward pressure for cost or upward pressure for innovation by international competition.
Except maybe the Bosch oven is made in germany. But tbh I wouldn't buy a Bosch oven, in my corner of the world outside Germany they're known for good tools not kitchen appliances. My Bosch electric screwdriver is great :)
They might even just do the bare minimum for that compliance , and put together sloppily made Chinese made parts in a cardboard box in some warehouse in Germany and call that Made in Germany in order to get subsides from the German state for maintaining jobs in Germany.
... and you can't even blame the Chinese.
I've worked a bit for companies having custom hardware manufactured in China. The factory will build exactly what you pay them for.
From sloppy stuff thrown into a box and shipped untested to clean work with reliable parts and a burn in test done before it leaves the factory. It's just that every additional step costs extra and the dignified western industrialists are trying to save money there...
They want durabilty and reliabilty.
Turns out if you make products that last forever, you end up with less sales in the long run putting you out of business when your customer base values the c convenience of cheap modern ewaste versus pricey things that last forever.
I think the original author's point is precisely that it's not necessary to have big, game-changing ideas to have a working, stable economy. It may, in fact, be better to have many small companies doing small, sustainable things, than to have a few startups doing things that have a huge upside if they work out, but also a huge risk of failure.
In Western democracies, small and mid-sized companies usually make up around 99% of companies, and around 70% of jobs, but in software, there's a huge focus on FAANG-type companies and unicorn startups. It might be better for Germany to focus on building a healthy economy of small companies, rather than trying to compete with Silicon Valley.
Germany needs to stop reinventing the wheel, clearly they don't understand how it works. They should instead just try doing what the US has done. In Norway our politicians are now talking about increasing our tax burden even more, and raising the cost of living even more so more money from middle-class and poor people in Norway can be used to shore up the failing German economy because they can't be bothered to pull themselves together. It's an embarrassment. All while Europe is still playing graduated escalation games with Ukrainian lives.