4 ms·

US firms can pay higher R&D/engineering salaries because they have a lower cost of capital. Part of the explanation for the lower cost of capital, is that US i

US firms can pay higher R&D/engineering salaries because they have a lower cost of capital. Part of the explanation for the lower cost of capital, is that US investors have a higher risk appetite than those in most other OECD economies; also, the US has an arguably more efficient pipeline (VC firms, etc) for getting money from investors to entrepreneurs. Some of it is no doubt influenced by regulatory issues (such as taxation differences), but cultural differences likely also play a role.

bhc 4y ago
I often hear US investors have a higher risk appetite, but why is that the case? I imagine it can't be just cultural differences.
- p_l 4y ago
  Availability of capital for investors is one thing. A lot of the VC pipeline also reaps rewards from how USA was the one country with untouched industry at the end of WW2 and then funneled huge amounts of moneys into expanding, not reconstruction.
- jandrewrogers 4y ago
  It is difficult to separate the culture from the consequences of the culture. In the US there is minimal social stigma for trying something ambitious and failing, the culture respects the ambition and courage to try even if it doesn't work out or the idea was slightly idiotic. In many parts of the world, trying something and failing is held against you and becomes a social black mark; Americans just shrug and move on to the next thing. Investors in the US reflect that culture. A lot of American cultural difference relative to the rest of the world can be explained almost entirely by the unusual absence of Tall Poppy Syndrome[0] that is a hallmark of most other industrialized societies. American culture respects those taking large risks for concomitant rewards, and doesn't begrudge the rewards that might accrue to someone taking those risks. It is easy to have a high risk appetite when it increases one's social status. [0] https://en.wikipedia.org/wiki/Tall_poppy_syndrome https://en.wikipedia.org/wiki/Tall_poppy_syndrome
  - DeathArrow 4y ago
    > In the US there is minimal social stigma for trying something ambitious and failing I think fear of bankruptcy can be a higher deterrent for foolish risks than social stigma. > In many parts of the world, trying something and failing is held against you In Europe you don't lose people's sympathy if you try something and fail.
    - jandrewrogers 4y ago
      I can't say that I know any Americans that fear bankruptcy. That doesn't seem like a serious objection.
- rtpg 4y ago
  I have to imagine there are simply more people with so much money that they can throw it around easily. Isn't the whole thing that (for example) when a big startup gets bought you suddenly have loads of millionaires with money to burn in their pocket?
Terry_Roll 4y ago
> is that US investors have a higher risk appetite than those in most other OECD economies Certainly here in the UK and certainly upto the mid 00's, if someone ended up bankrupt their life was over, blocked from credit in most cases, massively high interest rates in the future if they could get credit, the lenders certainly got their pound of flesh so it wasnt worth feeding the parasites, the population became risk averse. Repression comes back to bite... The other problem is the Class system, something Royalty holds onto dearly, and what some euphemistically call the old boys network, but it keeps people in their place so the [European] Caste system acts as a drag on the economy.
- toyg 4y ago
  The UK classism is not an EU-wide phenomenon - although a degree of classism is obviously still there (as it is in the US, in practice), it's not as utterly dominant in France or Italy as it is in the UK. The legislation around bankruptcy, however, is definitely very repressive on the continent too. TBH I don't think it's particularly lenient in the US either, but over there creating and operating companies is easier and cheaper, which means people can more easily offload debt obligations.
  - Terry_Roll 4y ago
    I agree its not as widespread in Europe, but you do find Royalty lurking in some EU countries and they do cause an increasing drag on their economies whether they want to admit it or not. Its the same in other parts of the world, Royalty is becoming increasingly toxic. > The legislation around bankruptcy, however, is definitely very repressive on the continent too. Europe has the largest slice of banking and financial interests but thats being slowly chipped away by the US. Look at some of the old banks which have gone bust or been swallowed up for liquidity reasons since the financial crisis in 2008. You have the US and UK printing money to dilute China's hard work, the Weimar republic has a lot of parallels.
DeathArrow 4y ago
I thought the low cost of capital comes from FED printing money and the fractional reserve system inventing money out of thin air.
- toyg 4y ago
  The ECB similarly prints "thin-air" money. That's not it. What makes the difference is the regulatory environment around corporations.

bhc 4y ago

I often hear US investors have a higher risk appetite, but why is that the case? I imagine it can't be just cultural differences.

p_l 4y ago
Availability of capital for investors is one thing. A lot of the VC pipeline also reaps rewards from how USA was the one country with untouched industry at the end of WW2 and then funneled huge amounts of moneys into expanding, not reconstruction.
jandrewrogers 4y ago
It is difficult to separate the culture from the consequences of the culture. In the US there is minimal social stigma for trying something ambitious and failing, the culture respects the ambition and courage to try even if it doesn't work out or the idea was slightly idiotic. In many parts of the world, trying something and failing is held against you and becomes a social black mark; Americans just shrug and move on to the next thing. Investors in the US reflect that culture. A lot of American cultural difference relative to the rest of the world can be explained almost entirely by the unusual absence of Tall Poppy Syndrome[0] that is a hallmark of most other industrialized societies. American culture respects those taking large risks for concomitant rewards, and doesn't begrudge the rewards that might accrue to someone taking those risks. It is easy to have a high risk appetite when it increases one's social status. [0] https://en.wikipedia.org/wiki/Tall_poppy_syndrome https://en.wikipedia.org/wiki/Tall_poppy_syndrome
- DeathArrow 4y ago
  > In the US there is minimal social stigma for trying something ambitious and failing I think fear of bankruptcy can be a higher deterrent for foolish risks than social stigma. > In many parts of the world, trying something and failing is held against you In Europe you don't lose people's sympathy if you try something and fail.
  - jandrewrogers 4y ago
    I can't say that I know any Americans that fear bankruptcy. That doesn't seem like a serious objection.
rtpg 4y ago
I have to imagine there are simply more people with so much money that they can throw it around easily. Isn't the whole thing that (for example) when a big startup gets bought you suddenly have loads of millionaires with money to burn in their pocket?

Terry_Roll 4y ago

> is that US investors have a higher risk appetite than those in most other OECD economies Certainly here in the UK and certainly upto the mid 00's, if someone ended up bankrupt their life was over, blocked from credit in most cases, massively high interest rates in the future if they could get credit, the lenders certainly got their pound of flesh so it wasnt worth feeding the parasites, the population became risk averse. Repression comes back to bite... The other problem is the Class system, something Royalty holds onto dearly, and what some euphemistically call the old boys network, but it keeps people in their place so the [European] Caste system acts as a drag on the economy.

toyg 4y ago
The UK classism is not an EU-wide phenomenon - although a degree of classism is obviously still there (as it is in the US, in practice), it's not as utterly dominant in France or Italy as it is in the UK. The legislation around bankruptcy, however, is definitely very repressive on the continent too. TBH I don't think it's particularly lenient in the US either, but over there creating and operating companies is easier and cheaper, which means people can more easily offload debt obligations.
- Terry_Roll 4y ago
  I agree its not as widespread in Europe, but you do find Royalty lurking in some EU countries and they do cause an increasing drag on their economies whether they want to admit it or not. Its the same in other parts of the world, Royalty is becoming increasingly toxic. > The legislation around bankruptcy, however, is definitely very repressive on the continent too. Europe has the largest slice of banking and financial interests but thats being slowly chipped away by the US. Look at some of the old banks which have gone bust or been swallowed up for liquidity reasons since the financial crisis in 2008. You have the US and UK printing money to dilute China's hard work, the Weimar republic has a lot of parallels.

DeathArrow 4y ago

I thought the low cost of capital comes from FED printing money and the fractional reserve system inventing money out of thin air.

toyg 4y ago
The ECB similarly prints "thin-air" money. That's not it. What makes the difference is the regulatory environment around corporations.