Why Berlin should not look up to the Valley
thirdwaveberlin.com
thirdwaveberlin.com
In order to take the right lessons from tech's failings you need to separate the tech from its social consequences. The fundamental problem with tech is that it kills jobs. It is about seeking greater efficiency in all things. This is why politicians are wrong to try to solve unemployment with tech. It would be great if everyone could move up the food chain in terms of creative and technical work and that tech could create more jobs, but the problem is that by its very nature, the 1% in the tech world will be more efficient than the bottom 90% no matter how much training they receive. 100 great developers will produce better returns than 10000 bad developers. There's no way around this fact. Hell, if you have a powerful enough intelligence that was orders of magnitude smarter than the smartest human then it could obsolete developers entirely by being more productive on its own than all the worlds smartest developers.
Increased efficiency is theoretically good, but we're reaching the point where we don't have the social capabilities to cope. We are wired to work, and to need to feel needed, and to feel that we have an upward trajectory in life. These things make it very difficult to cope with the impending unemployment crisis and the environmental consequences of a ballooning disposable culture. Tech is at the very heart of these issues, but Silicon Valley is not the cause of these problems, it's just one microcosm of them.
They have a link to the slide deck of a Federal Reserve about what was lossed and what was gained. Sadly, it didn't display in my browser.
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/02/28/h...
Yes, but those efficiencies open new possibilities. Transistors killed abaci and slide rules, and made skills in their use suddenly redundant.
Fast forward, and I'm reading about people employed to make realtime peer to peer video between any two people in the world.
Yes, truly self improving AI would change everything, and probably spell the end of the traditional economy, but I think we're a long while off yet.
That was a solved problem in 1998.
1. Is the rate of creating new possibilities equal to or greater than the rate of killing jobs?
If yes:
2. Is the difficulty of retraining our workforce today equal to or less than the difficulty of retraining our workforce in the past?
If yes:
3. Is the rate of retraining our workforce equal to or greater than the rate of creating new possibilities?
If yes:
Then yes, we don't have a problem.
We are now entering a period in which middle and high paying jobs being replaced by machines. High-frequency trading replaced a whole profession in the financial sectors. There are now machines that are capable to analyze an x-ray image and determine the cause of the problem, leaving the doctor with "just" the job of delivering the news.
So, yes, we do have a problem. I'm not a Neo Luddite. The purpose of this is not to destroy the Internet and all the machines, but I do think that we need to have an ongoing debate about the social structures that we are dissolving as much as about those that we want to build up.
But it also created one. Someone has to both conceive and write each algo. This looks like the old profession, except with different people because Excel is being replaced by C++.
http://www.vanityfair.com/business/2013/09/michael-lewis-gol...
The algos can be created by fewer people. Traders are being replaced by the algos, and fewer people are required to create the algos than do the original trading. So your point does not have a 1-to-1 job creation-destruction ratio.
> This is why politicians are wrong to try to solve unemployment with tech.
The second does not follow from the first. Technology will always be killing jobs, and local politicians can do nothing to prevent that. The only difference they can make is where the profits from the old jobs go to; if they just stand by and watch, they will all go to companies in a few global tech centres, most in the US. However, if they encourage the development of a local tech scene, the efficiency problem might be solved by local entrepreneurs, meaning that they can still tax the profits, etc., making the local population better off.
Also, I strongly disagree with your claim that "We are wired to work". We are raised to work. And by "we", I mean particularly the people far away from the equator, who always needed to work to survive. Personally, I would not work if I didn't need it for survival (or more free time in the future), and I'm certain there's many more people like me in the world. Why do you think kids play in their free time, and teenagers party?
:) However, I believe there is a world possible for both of us, as you can do the work while I relax, and we are both happy.
For me, to relax means to be without obligations, not to be completely idle.
There is still an immense amount of work to be done in schools, hospitals and social services that is not being obsoleted by technology anytime soon. It is not being done or done well because of a lack of money.
The solution then is much more taxes on capital, much less on human labour and way more redistribution.
Our industry leaders (Google, Facebook, Amazon, etc.) are all monopolies which pay little tax and employ anti-competitive practices to squeeze out competitors.
And few seem concerned with inequality.
Let's shape our companies towards something better.
http://it.bing.com/search?q=monopoly&go=&qs=n&form=QBLH&filt...
http://www.powells.com/s?kw=Monopoly+economics&class=
Maybe not?
> And few seem concerned with inequality.
Companies are for making money. If the people they make money for are concerned about that, they can vote - or distribute their own money - accordingly.
Smart companies realize that their profits do not exist in a vacuum. In Germany it's a long standing view that capitalism must be balanced and that companies have a social function in society and must act accordingly. This is one of the secret powers of what we call "Mittelstand" which employs the majority of people in Germany and produces a huge share of the social product. Those companies are often family owned and pride themselves in taking good care of their workforce - a trait that often pays off when times are turning worse since the employees reward good treatment with loyalty. It's not uncommon for a complete workforce to accept pay cuts across the board instead of firing people which in turn allows the company to keep well trained and educated workers on the payroll until things get better. Both sides profit here.
So yes, companies are for making money, but smart companies think further than next years profit statement.
I won't disagree with that - I think it's sensible - but what you have written is different from "concerned about inequality".
I don't think so. Henry Ford for example realized that paying solid wages allows people to buy more cars [1], in turn increasing the profits for Ford. Reducing inequality in a society strongly correlates with social peace and happiness, which in turn fosters the economy. Good social equality also helps a larger part of the population to achieve good education, broadening the pool of skilled labor. Certainly, a single bad actor in a good environment can reap benefits from behaving "anti-social", but in the long run that's a spiral to the bottom. So I think that smart companies should be concerned about a raise in inequality, even if it's only for their own good. And making sure that you keep inequality low in your own workforce is the first step.
[1] http://corporate.ford.com/news-center/press-releases-detail/...
More precisely, Henry Ford convinced a bunch of innumerate reporters and politicians that paying solid wages allows people to buy more cars.
Showing that high wages alone [1] only hurt Ford is simple math. Say a car costs X to build and Ford can sell them for X+P. If Ford gives a worker X+P in wages, and the worker spends X+P on a Ford car, Ford winds up losing X.
[1] Higher wages helped Ford to poach more productive workers from the competition.
If Ford is the only company paying high wages - yes. However, somebody needs to buy the products and services that companies offer and the more people can afford a service, the broader the potential customer base. A high inequality concentrates a huge share of the income and capital at the upper end of the scale. However, there's only so many cars a person can buy and drive, only a limited amount of phones you'll buy, only a strictly limited amount of haircuts you'll need, not matter how high your income is. The trickle down effect that's always promoted is a myth.
* Rich people at the top and extremely poor people at the bottom. I generally think this is a bad thing.
* People who are ok at the bottom, and really, really rich people at the top. I'm less convinced this is a problem.
In any event though, this is swerving into kind of philosophical terrain about what we all view as the best society.
I too got out of Silicon Valley because I didn't like it, but that's fine, the world is a big place and there is room for different ways of doing things without hating on some large, successful companies because they don't have a political view that you happen to like.
That's certainly true for publicly traded, anonymous companies. But companies in general are for making what the owners want them to do.
Being a monopoly (at least in economics) does not mean being the only player in a market, but rather about being big enough to affect/set prices in the market.
That's the thing that pays most. For some reason our society rewards advertising platforms. Everything from popular films and music, to every successful medium ever, was founded as or taken over as an advertising platform.
Maybe we as a society simply value advertising above all?
Personally I try to only work with companies whose business model is providing values to users directly, but I can't argue with the fact that I am far more willing to give my money to advertisers (so I can make a profit), than I am to services that help me make the products I advertise.
Why is that? I don't know. But I think the feedback loop from "put money in, get money out" is much quicker with advertising platforms than it is with services I use during creation.
Sad thing is of course, that modern advertisement is based on subconscious influence to make the product part of your lifestyle instead of presenting you a balanced presentation of the benefits and drawbacks.
Shameless plug: I released a desktop app for project tracking in the Ubuntu Software Center a few days ago as side project. Here is a non-subconscious manipulating presentation about it:
http://www.youtube.com/watch?v=xA_KckRueLQ
Note: the initial package has a dependency issue. A fix is in review.
However as the author states, the sustainability of the tech sector is very critical, but this not specific for Berlin. Even in the silicon valley there is a trend towards more sustainable growth models as the hundreds of SaaS startups here on HN would testify.
Being a really open and relaxed city with a high quality of life, Berlin stands a good chance of attracting talent, allowing them to try out their ideas and hopefully create an IPO or two in the next ten years. I can't see why the author categorically dismisses that option.
So far, I fail to see how technology companies are going to be any different.
[1]: http://www.spiegel.de/wirtschaft/soziales/bundeslaender-rank... (2011 data)
Actually I often wonder what all the people here do for a living. I guess the main employer is the government now.
The water supplies do work fine, the problem however is, that, much like Dresden's sale of its city-owned flats to the Gagfah (an investor), selling core infrastructure to investors risks long-term sustainability in favour of short-term profit. You might be right though that this is somewhat down to ideology.
London and Paris are comparable (and worse)
Cost cutting by DB? So the problems are in the S-Bahn rather than the subway/BVG?
Edit: ok I read some answers, I'll add that DB is rebuilding the bridges on Yorkstraße
Financial incompetence and bad planning are a strong factor. West Berlin used to be subsidized before the wall fell and since nobody ever questioned the amount of money flowing here they could basically do what they wanted. After the reunion Berlins administration expected the population to grow to 5 million by the year 2000 but that growth never materialized. Still, they kept spending money like they used to.
> Problem for a long time has been that Berlin is very big, yet has no big industries.
It actually used to be the core of the german tech industry. There's whole quarters named after companies: Siemensstadt, Borsigwerke, ... and whole blocks in the city that used to be factories - Oberbaum city that used to be the Osram Lamp factories, Varta, ... A lot are now converted to office space.
> Actually I often wonder what all the people here do for a living. I guess the main employer is the government now.
Government is a strong factor. A lot of media companies moved to Berlin and a lot of service and support, especially for companies which trade a lot with eastern europe. The BASF has their whole eastern european business support in Berlin - that big tower at Warschauer Strasse. Berlin is fairly strong with biotech startups as well. No industry to speak of, though.
Compare it to Munich, where it's a minor scandal if one S-Bahn is like 5 minutes late. That's outstanding.
People are just discussing whether substantial investment to attract tech companies is wise if the hope is that tech companies will contribute towards fixing social problems or even contribute substantially to the local economy.
In the UK we normally think of Germany as having very good technical education that puts us to shame - for some reason does this not work in IT?
Why are not larger companies in Germany not training IT apprentices.
A start up almost by definition requires more experienced workers.
Try that with IT. Did MongoDb exist 5 years ago? Did Node.js? The list is endless.
Information Technology moves too fast for the German style and concept of apprenticeships (in my opinion). There are apprenticeships for Informatik, but I see them much like undergraduate Computer Science courses.
My experience of CS undergraduate studies are that you will learn the basic concepts, and a bunch of bullshit thrown in that you'll never use again in the workplace, but that is about it.
Having more people who have been taught properly from first principals rather than only learning the latest trendy thing woudl be a very good idea! You would certainly have less of the "developers who cant program fizz buzz problems"
And I would expect a competent person to be able to pick up mongodb or nodejs even before they had finished the 4 year apprenticeship.
I started my career on the vocational track track (in mech eng) and on my second day at work they said "pop down the the company library there is a book on FORTRAN learn it"
(sorry for caps lock - this is copy and paste) - FACHINFORMATIKER ANWENDUNGSENTWICKLUNG (software eng./dev.) - FACHINFORMATIKER SYSTEMINTEGRATION (sys. integration) - IT-SYSTEM-ELEKTRONIKER (IT technicians) - IT-SYSTEM-KAUFMANN (IT business) - INFORMATIKKAUFMANN (again IT business) - Mathematisch-technische Software-Entwickler - Informationselektroniker - Fachangestellte für Medien- und Informationsdienste - Mediengestalter Digital und Print
In conclusion: the chamber of commerce ideed did its job. If they did it very well is a question of perspecitve.
To bring this into startup context: Most very early Startups won't take apprenticeships as this is an additional workload and overhead (apprentices want to be tought...) that might not pay off in the short term. As an apprentice I would also think twice about joining a startup as one needs at least 2 1/2 years to finish the apprenticeship. (Startups might not exist that long.)
my 2 cents
But your right a startup with say 5 developers trying to develop a product in a short time scale is probably not suitable for trainees.
How how do the apprenticeships is it day release or block? 1 day a week at college and working 4 days a week is not that to much to ask from an employer? especially as apprentice's probably are paid less.
I am assuming there is a system of training levies so that the cost is born across the whole of industry - when I did mine (in mech eng) we joked that the government gave the employer more in grant subsidy for us than our actual salary.
Let me finish with a question: what do you think who
employs more people? A company like Facebook with a world-
renown brand that is worth about $100 Billion on the stock
market or a hundred companies that most people have never
heard of which are each worth a billion people?
1. Idea
2. Borrow money from the bank
3. Employ people
4. Build products/services
5. Sell products/services
6. Profit
7. Re-invest and repeat from [3].
8. After 20 years of repeating - sell company, take-over, child inherits
Failure in this instance is often catastrophic to the founder.
I also think that there are a number of SaaS startups that are simply SME's and use the label "start-up" in order to try and get target investment from the VC daisy chain. Their model is often aimed at short cutting and gambling without risk to themselves:
1. Idea
2. Borrow money from investors
3. Build products/services
4. Sell products/services
5. Repeat from [2]
6. After 10 years of repeating - fail, acqui-hire, sell (and integrate) or IPO
Failure in this instance is often a learning experience to take into the next start-up venture.
One notable point that the author doesn't mention is the German adversity to risk. The average Germans doesn't take massive risks. The start-up model holds massive risks to investors, but or course the returns for success are equally huge. Germans would prefer a guaranteed 1.5% return per year to a risky 1000%. That isn't likely to change in the near future.
Companies with broken business model, or with no business model at all get overvaluated while companies with more traditional models are worth nothing these days. (Compare the prices for Instagram, Facebook.. with big companies like Nokia or Blackberry)
In times like this the best bet is to create private companies and not open it to the stock market at all like the old days..
The SV model may create instantaneous billionaires, but someone will have to pay for this wonderland(of a few) in the end..
and probably will be the government(aka the tax payers)
my question is: isnt this model broken in the long term? will it survive? who wins? who lose?
Germany, despite being technologically strong, is not very inovative. At least not in the sense of new, scaling products. One of the most famous examples is MP3. Also, Germans in general are quite risk averse. And if new companies are founded and are successfull, they tend to end up in the mittelstand model. While that indeed is one of the cornerstones of the german economy, these companies are most of the time too small for an interessting tech IPO.
Yet another reason is the way the german industry is structured. We are very manufacturing driven, which extends all the way back to education. And manufacturing companies is what the german economy wants. So, if a start-up devlops a new way to manufacture, say, ball bearings there are basically two outcomes. They either find enough investors to built an own construction site and / or the necessary structures to outsource production and sell to the various industrial customers. That's expensive, especially compared to the archtypical SV start-up, that's risky which drives of most banks and goes against the common risk aversion and takes time and people. People, again, are hard to come by since most tech people (read: engineers of all colors, mathematicians, physisits,...) all want to work for one of the big names instead of a small, newly founded company. More on that and education later. The second outcome is that they either get bought by some existing company or the patent is liscensed or bought. In this case it doesn't really matter wether the product in question actually the light os day or not, the company simply doesn't IPO.
Finally, what in my opinion makes it very unlikely that a company has a sucessfull tech IPO in germany anytime soon is people. There's education, focusing on producing people for the existing technologies and, even worse, companies. Some universities have programs for entrepreneurship, but these programs are small, young and mostly producing start-ups that end-up aquired. But it's at least a start. Another problem start-ups are facing on the people side is that most students in technical domains want to wrk for, say, BMW or Audi. Meaning these companies can pick the, at least in theory since there's always the chance of missed talent, the brightest people leaving the rest for the smaller players. And for a start-up to succseed you need the brightest (try to beat BMW here). Finally, failure and unemplyment carries a certain stigma in germany. So once you tried a start-up and failed in terms of future emplyment you are facing two major problems:
- You failed, by definition that's your fault and we don't hire losers (slightly exagerated)
- You have been your own boss for a while, which means you are unable to work under a boss. We can't need people like that.
And finally, German engineering and technology tends to be over engineered. And the shows in all aspects, be it tech, processes, products, you name it. That's great for existing products since it usually produces quality (if this quality is actaully needed or not is completely different question). But that also makes things like a MVP very hard to built and almost impossible to sell in Germany. And why building something in a market you can't sell to.
That's my take on why the author and I see a (major) tech IPO out of Berlin unlikely.
That's the result of a tech-centric worldview (read startups, sw). Quite the opposite is true, for instance in the area of 'Green Tech'.
> While that indeed is one of the cornerstones of the german economy, these companies are most of the time too small for an interessting tech IPO.
I don't your argument here. You mean success == IPO here? There are plenty of highly profitable Mittelstand companies with a profit and revenue much higher than e.g. LinkedIn. What does that mean here, that LinkedIn is unsuccessful or that the other Mittelstand'ish company is? IPO is not a value of its own as some reports might indicate. Looking at Mittelstand, as the author wants us to, is about the values surrounding a company, for instance to re-invest money in a sustainable way, that it is not about growth for growth's sake (which seems to be an inevitable by-product of going public!) but making better products.
> Finally, what in my opinion makes it very unlikely that a company has a sucessfull tech IPO in germany anytime soon is people. There's education, focusing on producing people for the existing technologies and, even worse, companies.
For University-level education, this definitely and absolutely does not apply.
Green Tech is en vogue right now in germany, yes. But after what happened to the solar industry and is currently happening to the wind power industry leaves me a little bit sceptical. But I have an opinion all of my own on all of the green tech stuff which I'm pretty sure is very different to yours.
Having studied in Germany, I disagree with you regarding education. My experience was that trying out new things, experiment and question the status-quo is not actually encouraged. Sometimes quite the opposite. In Germany, a lot of effort is spent on improving exiting technology, which is, again, one of the key strength. But as strengths go it can be really weakness in a different context. And when it comes to disrupt things (which start-ups should do) this attitude becomes quite a handicap.
It was a counter argument to a massively Silicon Valley focused industry. A plea to extend the horizon of what constitutes a best practice.
If that's the massage, I comletely agree. If Berlin can actually create new breed of start-ups that shows certain characteristics of mittelstand companies that can only be a good thing.
I had heard about but did not know very much about Mittelstand.
https://en.wikipedia.org/wiki/Mittelstand
We have lessons to learn from European paradigms as you point out. However I think you are a little harsh on founders, the pursuit of fame may be an issue for a small minority but is hardly a universal issue.
Sorry, I wasn't prepared for ending up on hacker news. Thanks for the feedback so far, will try to answer to some of the comments soon.
In addition “rich white men” comrade who do you think owns all those Mittelstand companies - Germanys far less diverse than the US or the UK in that regard.
Mittelstand is all very well but there are a number of problems with then in that they are very tightly controlled secretive family businesses - there appears to be no worker participation in the ownership of these companies what so ever.
Mittelstand companies have also recently benefited immensely from the Euro selling all those Porsche Cayennes to Greece
I think possibly German concentration on traditional engineering means there is less hinterland to build tech start-ups from – and I suspect that IT training has been starved as mech and electrical engineering probably played the political game better.
My Mate will be getting over £60k's (tax free) worth of shares next year from his FTSE100 employer this is just the basic share options that every employee has access to.
The sustainable business way appeals a lot to me, but what about the risk that competitors with lots of money crush us just by out-spending us? And what about the ecosystem? But the places with the best ecosystems are very expensive, how can you enter them without VC money?
The problem is that there is no proof that the mittelstand model can work for tech startups, while there is proof that the SV model can.
To me it seems pretty obviously that one is the antithesis of the other. Mittelstand seem to work well in established markets with a sensible good quality product or in niche markets where they could often be the only manufacturers worldwide. It does not strike me as the kind of enterprise that aims to grow fast and disrupt markets.
Besides, there is already Middelstand tech businesses. They are the software houses that write niche B2B software like time table schedulers for schools and such.
Im very interested in alternative cultural models for tech products in the digital age, specially because technology has such a impact in peoples live, and can improve the quality of life of everybody in so meaningful ways..
So, where can i find more about the Mittelstand? is there some discussions about it somewhere? is there any group trying to think new models that contrary to the status quo can create a virtuous cicle in the whole community and not only for a particular group of privilege?
I am very interested at this, and as a Brazilian i keep an eye in what Europe are doing, and how they are thinking , since they are not taking the SV model for granted, and just repeating.. but trying to get a new meaning out of it, without forget its own cultural values.. (at least it was what i feel and are confirming by reading the posts from the german fellows)
Im asking this, because is that what im trying to do too.. I dont want to just launch what i have in hands in the current model.. i think we can do better.. so im interested in all movements over this topic.
Note: im specially interested in social groups, and less in literature about it.. as i think this is still in formation.. and new cultural models(if any) are in its infancy
Here in Germany there are also quite a few towns that are built around one big company, for example Wolfsburg for VW.
No doubt Berlin is attractive at the moment, but the things that make it attractive are quickly disappearing - cheap cost of living, lots of empty buildings, lots of diverse culture.
I for one don't look forward to the living conditions of the valley, where people have to share rooms at extremely high costs just to be able to be there. It seems very ironic that while it is presumably one of the richest places on earth, the valley sounds like a horrible place to live in.
I have found a few people that have a tech/scientific background and take up the fight in the startup scene, but so far all but one them have moved to the US.
I would be greatly interested to connect and meet with people from technology/science that would like undertake a venture in wet-/soft-/hard-ware. But alas, there are few of them into the startup scene in Germany, for most a heading to the industry sector after their dissertation/master.
So, if you are one of the above --> contact me.
$ nslookup thirdwaveberlin.com
> Non-authoritative answer: * Can't find thirdwaveberlin.com: No answer
That would be a good thing, right?
There is no passion anymore