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The Mittelstand mentality seems contradictory to me: I've always associated financial risk-taking with a long-term mentality. You have to be thinking in growth

The Mittelstand mentality seems contradictory to me: I've always associated financial risk-taking with a long-term mentality. You have to be thinking in growth terms to take financial risks, and it's the exploit end of the explore-exploit trade-off not to take financial risks. These companies sure have longevity, but I have doubts that they would have done worse in 99% of cases when loaning money would have made long-term business sense.

CaptainZapp 5y ago
If it's a bank loan. Maybe. If they go public they would have been damned to the same quarterly short-termism as other public companies. Overall their financial prudence doesn't seem to have hurt most Mittelstand companies.
gmueckl 5y ago
It's perfectly acceptable to have a business hum along if it is stable. It doesn't have to go for the maximum possible growth, risks be damned.
twic 5y ago
Risk-taking is necessary for a long term chance at riches, but not long-term survival. Consistently making inflation plus iota is what you want for the latter.
- cycomanic 5y ago
  It's worth noting that many larger mittelstands companies have significantly higher R&D budgets (percentage wise) than lots of aggressive growth companies. In fact I'd argue if you want to grow quickly investing in R&D is often a bad strategy, because the payoff is much more long-term and less clear.
zz865 5y ago
I think they're successful because 95% of manufactured goods are pretty similar to what they were 50 years ago, just with steady incremental improvement. VC backed firms have done a great job with new tech, but if you're making an industrial pump, crane or mechanical pencil you dont need to move fast and break things.
formerly_proven 5y ago
Getting a bank loan (as a company) is actually really difficult in Germany, despite bank rate being negative for years now. Even for a business that does astoundingly well it will be very hard to get a loan if income is consistently re-invested -- so essentially banks only wanna lend money to businesses who have no need for it.
cycomanic 5y ago
Could you explain a bit more, I don't really understand what you are saying. Do you mean they would have been better off to just borrow money/get investors to grow aggressively? And by better off, do you mean be worth more or be more long-term secure?

CaptainZapp 5y ago

If it's a bank loan. Maybe. If they go public they would have been damned to the same quarterly short-termism as other public companies. Overall their financial prudence doesn't seem to have hurt most Mittelstand companies.

gmueckl 5y ago

It's perfectly acceptable to have a business hum along if it is stable. It doesn't have to go for the maximum possible growth, risks be damned.

twic 5y ago

Risk-taking is necessary for a long term chance at riches, but not long-term survival. Consistently making inflation plus iota is what you want for the latter.

cycomanic 5y ago
It's worth noting that many larger mittelstands companies have significantly higher R&D budgets (percentage wise) than lots of aggressive growth companies. In fact I'd argue if you want to grow quickly investing in R&D is often a bad strategy, because the payoff is much more long-term and less clear.

zz865 5y ago

I think they're successful because 95% of manufactured goods are pretty similar to what they were 50 years ago, just with steady incremental improvement. VC backed firms have done a great job with new tech, but if you're making an industrial pump, crane or mechanical pencil you dont need to move fast and break things.

formerly_proven 5y ago

Getting a bank loan (as a company) is actually really difficult in Germany, despite bank rate being negative for years now. Even for a business that does astoundingly well it will be very hard to get a loan if income is consistently re-invested -- so essentially banks only wanna lend money to businesses who have no need for it.

cycomanic 5y ago

Could you explain a bit more, I don't really understand what you are saying. Do you mean they would have been better off to just borrow money/get investors to grow aggressively? And by better off, do you mean be worth more or be more long-term secure?