5 ms·

The German Mittelstand

76 points by Michelangelo11 2mo ago

lz400 2mo ago
re: the crisis of the Mittelstand in competing VS China, I'm reminded of this tweet. It's a fictitious illustrative case not a serious study but I think it describes some of the root challenges of western industrial culture when it comes to competing against China https://x.com/AngelicaOung/status/1921364873444986888 https://x.com/AngelicaOung/status/1921364873444986888
- Incipient 2mo ago
  I don't think the fundamental premise is much of an issue - it's what a (mostly) free market is meant to do. Someone sells a chair for $100, someone else believes they can sell it for $80, so they do. There are two main complicating factors (outside of brand reputation and possibly some others?) 1) quality - someone accepts the $80 chair which is a little bit more wonky 2) the $100 company spent a few years developing the technology to steam and bend timber to make the chair so they're marking up based on R&D and ip. The $80 chair company just copied the other tech There is absolutely a lot of profiteering (charge what we can, not what we need to) happening, but honestly I believe that happens everywhere, including China (trivial case - wild price swings on aliexpress - they're maximising profits).
  - bluefirebrand 2mo ago
    > There is absolutely a lot of profiteering (charge what we can, not what we need to) happening I think that profiteering is the default behavior for companies. Maybe not all companies behave this way, or maybe in the past it wasn't the default behavior, but I'm very confident it is now
  - gmerc 2mo ago
    In the digital world quality is a post purchase signal and the ability for consumers to communicate about quality has basically been destroyed by allowing paid counterparts by businesses to drown out the signal
  - lz400 2mo ago
    Agreed, it's that the free market _allows_ you to do. What's concerning is that we're used to the "semi-benevolent" image of the free market where a company succeeds and then returns value to stock holders, and the employees and the investors and the country all share of the riches. Of course the executives and main shareholders get outsized returns, inequality might raise, but many people see a bit, and capitalism works, kind of. This new Chinese "involutioned" capitalism is much more scary and robotic. The companies never really make money, becoming just an operation that maintains itself on minimum wage workers, all to the service of reducing prices. Shareholders don't make money, employees are semi-poor, nobody sees any returns. But the customers see cheaper prices! you say. Sure, yes, the products get cheaper, but now think of yourself as an employee not a customer. Imagine the involutioned companies triumph. Your previous company, where you had a good salary goes bust. You find a job in an involutioned company where everyone is almost poor and worked to death just to reduce prices. Your portfolio goes to shit because companies don't make money anymore.... Sure, everything's cheaper now but I'm not sure that makes it better.
    - pingou 2mo ago
      But if everything is cheaper, isn't it exactly the same as if everybody is richer? Except that it could incentive people to put their money into rent seeking businesses and increase the real estate prices for example.
    - luke5441 2mo ago
      You forgot the last part about now no one having money anymore to buy the companies products, so you go into a deflationary spiral. To solve that you'd want to increase wages by e.g. improving workers rights, giving them mandatory pensions etc. But that is scary: They might get too much power and revolt! This works for China currently for a while, because they are exporting more and more. They have realized that they need to grow internal consumption, but are not managing to grow that sufficiently.
  - decimalenough 2mo ago
    The original Aalto stool, consisting of three pieces of bent wood and a circle, costs $479: https://www.finnishdesignshop.com/en-au/product/aalto-stool-60-birch https://www.finnishdesignshop.com/en-au/product/aalto-stool-... The IKEA copy, identical except that the circle is more of a triangle, costs $19: https://www.ikea.com/us/en/p/kyrre-stool-birch-60416925/ https://www.ikea.com/us/en/p/kyrre-stool-birch-60416925/ Both companies are very profitable, but I'm sure IKEA shifts a lot more units. And the Aalto stool is solid wood and will last forever, while the IKEA copy is probably laminated cardboard or something.
    - summa_tech 2mo ago
      Laminated wood veneer for legs, plywood for seat. Not as disposable as the eternal LACK, but also not bent wood.
    - esafak 2mo ago
      This is a great demonstration in the value of approximation. The IKEA is close enough for most people's tastes at a much more attractive price point.
- avhception 2mo ago
  I guess it depends on where you would draw the line with respect to what still constitutes "Mittelstand", but in the small-town circles where my family operated our company, outsourcing wasn't really a thing. Most of the companies were around 30 to 3000 employees, and mostly operated B2B for the automotive industry. There was exactly one company which got overly ambitious and started to emit shares. It was a big deal back in the 90s, SHARES! From our hometown! Like, you could watch it in the Ticker in the evening news if you waited long enough! But they quickly faltered when the golden 90s turned into the permanent state of crisis beginning in the 2000s. Most of the others were still family-owned, including our own (electroplating, ~130 employees), and stuck it out much longer. But we've since had to close doors, too, as have most of the others. It's a combination of things. Regulations have you in a chokehold, you can't get decent employees, and every process input from energy to equipment to real estate related costs and whatnot just cost an arm and a leg and slowly bleed you dry. Nobody here ever flew business class (except maybe these flashy idiots with their shares). The families always re-invested.
  - clarionbell 2mo ago
    This seriously needs to be repeated again and again. It's not that Mittelstand got greedy. Neither did most other small and medium companies in Europe and US. They gradually became less competitive by overregulation, high input costs, and complete lack of state support. The last sometimes bordering on hostility.
    - RandomLensman 2mo ago
      There has been at least indirect state support for some by support for the automotive industry. They might have gotten squeezed as a supplier but the ecosystem got help to keep moving.
    - avhception 2mo ago
      Anecdote time re: Over-regulation: We had a side-hustle, automatic sorting machines. Mostly nuts and bolts, but other stuff, too. About 10 employees. By some miracle, it managed to survive the loss of it's biggest customer (the aforementioned electroplating company). But we had to move shop. After we got a place, the city terminated the operating permit for the building. Why? Because, you see, the company that operated the building before had it filed as "metal working", so that is what the permit said. But _sorting_ metal doesn't alter it, so the permit doesn't hold! And they wouldn't issue a new one. Fun times.
- crote 2mo ago
  This is why the West is getting its ass kicked in non-legacy industries. Our MBAs have internalized the idea that you "win at capitalism" by buying out your competitors, making products shitty and expensive, and making shareholders filthy rich. Their MBAs believe that it means selling the best product possible at razor-thin margins, killing your competitors by being the better choice. Everyone is always complaining about Chinese companies "stealing IP", "getting state subsidies", and "dumping products". No, they are just being better at capitalism! We bootstrapped their industry with outsourcing, and then killed our own subsidy system by retooling it to give free money to large shareholders. No wonder our companies aren't able to compete - we reward incompetence...
  - izacus 2mo ago
    Somehow MBAs, our champions of capitalism, completely forgot that capitalism only really works for society when free market competition takes place. This is what's attractive about the "Mittlestand" - having a wide variety of companies competing in the same market so they push each other to improve services. 21st century consolidation is a direct opposite of that.
    - vrganj 2mo ago
      But consolidation is the inherent end game of capitalism. It's almost as if it was full of contradictions that will always result in crises and a bad way to organize a society...
      - ahartmetz 2mo ago
        Some of these contradictions can be fixed well enough by government intervention to make capitalism the best known system. It used to work pretty well for several decades.
        vrganj 2mo ago
        Several decades being 1.8 decades since the last major crisis?
jonstewart 2mo ago
> Advancing the precedent set by Alfred, generations of Krupps would continue to develop the region through various private and public works, for almost a century into the 1920s. > > With their basic needs addressed and the workforce inculcated with the “Kruppianer spirit,” the firm crossed the fifth ring. They forged an empire that, by the late 1950s, <insert Goose meme> “What did Krupp make in the 1930s?” This was kind of an interesting article but could have been a great deal shorter and wasn’t particularly insightful.
- rbinv 2mo ago
  Thanks for the meme chuckle. For the uninitiated: https://i.imgflip.com/ayibmd.jpg https://i.imgflip.com/ayibmd.jpg
gyulai 2mo ago
the article was a bit long for me to read, but when i hear "mittelstand", i think "inherited wealth", regulatory capture leading to gatekeepting of access to the trades and crafts, and employees that are getting paid less than they would in larger industries in exchange for lofty blah blah about family friendliness (sitting in a weird contrast with crazy levels of bean counting when it comes to, e.g., flexible working time and vacation entitlements).
- grebc 2mo ago
  Lol.
- camillomiller 2mo ago
  [flagged]
  - gyulai 2mo ago
    It was providing context which some people may find useful. The article, rather than being a strictly historical treatise, is taking the bait to propagate some narratives about the motivations behind why these companies do business the way they do. Reframe "family values" as "paying less" and see where you land on a critical appraisal. Reframe "rooted in a region" as follows: Being a relatively large fish in a relatively small pond is often strategically preferable to being a relatively small fish in a relatively big pond, if your strategy involves regulatory capture of local government and the formation of a cartel with the handful of other Mittelstand employers in a region that otherwise doesn't have much going on. Reframe "excellence in crafts" as "keeping out the competition". I've seen all of these bullshit narratives getting spun, and all of these mechanisms at play, over the last 7 years, having lived in two separate such regions in Germany. It is a scent of bullshit that is very well known to me. When I see other people in danger of being misled, I will say something, just as I will say "watch out", when I see someone about to get hit by a car.
    - RandomLensman 2mo ago
      Well, people could move to places with higher wages (e.g., cities), no? Being in a place where you could help shape local politics seems like a good move, no? What is the issue with "excellence in craft" as keeping "out the competion"? Why would anyone not want to beat the competion?
camillomiller 2mo ago
I was enjoying this until this signature sentence by Claude: >>Slowly but surely, it did, once again becoming a world-renowned brand, now separate from that of Thonet. The same town, the same factory, the same people—just a different name The moment I see this, the piece loses all of its credibility. I cannot take any of the factual informations I was enjoying as implicitly correct now, I just can’t. Authors should edit LLM help in a much stricter way. As a writer, LLMs should only be research helpers and used to check for typos and syntax mistakes. Authors, please, do better
- jillesvangurp 2mo ago
  I think it's more likely model creators will up their game. I've been generating some copy for our company website. I'll be honest, not all of it is great and there are clear AI slop signs. However, you can use guard rails to limit this kind of thing somewhat. I've been doing that. But the good news is that there are pretty easy to spot patterns. And LLMs are actually really good at identifying those already. It seems spotting the patterns is a lot easier for LLMs than addressing them. > As a writer, LLMs should only be research helpers and used to check for typos and syntax mistakes. Authors, please, do better I know professional writers that are definitely no longer just limiting themselves like that. I think that ship has sailed.
  - keybored 2mo ago
    Everyone with a stake in AI wants that ship to have sailed.
- HawtAds 2mo ago
  You do know em dashes are a normal part of formal prose right? If you go through pre GPT New Yorker and the Atlantic articles, there are plenty of em dashes too.
  - AdamN 2mo ago
    The New Yorker has a whole style guide. Most people aren't writing "née" or "reëlected" very often but the New Yorker keeps those formats and even has a custom typeface. Yes em-dashes are real but aside from a few NY-based magazines with real editors, writers aren't actually using them very much. I'm a bit sad because I like using them and now I think twice before doing so in case it is misinterpreted as an AI signature.
keybored 2mo ago
Reads like capitalist romanticization to me. The point about concentric circles (of care) is true e.g. for workers. If you have ownership. Not corporate-speak ownership like you feel like you are invested in outcomes but real, legal ownership. Maybe these are capitalist cooperative enterprises. Then you really have concentric circles.
barrenko 2mo ago
Post WW1, the US was a world hegemon, lent money and set low interest rates and for the past 100 years the countries of the Western EU, fattened from their ancient trade and slavery profits were engaged in a lot of delulu thinking (we could even note franco-prussian war for this). Effectively there is no job / value creation since at least the 90s, coupled with uncontrolled mass immigration, and what is going on is stagnation and eventually fall. Lento, then adagio, then allegro, then presto as nn taleb says. We can see this mindset in this summers AC discourse, doing less than Pakistan on the Hormuz situation et c., et c.
topaz0 2mo ago
Wood bending is way older than the nr 14. Plenty of that stuff in 18th c. Europe but apparently it was a common technique in lots of cultures before they had any contact with europeans too, going way back.

lz400 2mo ago

re: the crisis of the Mittelstand in competing VS China, I'm reminded of this tweet. It's a fictitious illustrative case not a serious study but I think it describes some of the root challenges of western industrial culture when it comes to competing against China https://x.com/AngelicaOung/status/1921364873444986888 https://x.com/AngelicaOung/status/1921364873444986888

Incipient 2mo ago
I don't think the fundamental premise is much of an issue - it's what a (mostly) free market is meant to do. Someone sells a chair for $100, someone else believes they can sell it for $80, so they do. There are two main complicating factors (outside of brand reputation and possibly some others?) 1) quality - someone accepts the $80 chair which is a little bit more wonky 2) the $100 company spent a few years developing the technology to steam and bend timber to make the chair so they're marking up based on R&D and ip. The $80 chair company just copied the other tech There is absolutely a lot of profiteering (charge what we can, not what we need to) happening, but honestly I believe that happens everywhere, including China (trivial case - wild price swings on aliexpress - they're maximising profits).
- bluefirebrand 2mo ago
  > There is absolutely a lot of profiteering (charge what we can, not what we need to) happening I think that profiteering is the default behavior for companies. Maybe not all companies behave this way, or maybe in the past it wasn't the default behavior, but I'm very confident it is now
- gmerc 2mo ago
  In the digital world quality is a post purchase signal and the ability for consumers to communicate about quality has basically been destroyed by allowing paid counterparts by businesses to drown out the signal
- lz400 2mo ago
  Agreed, it's that the free market _allows_ you to do. What's concerning is that we're used to the "semi-benevolent" image of the free market where a company succeeds and then returns value to stock holders, and the employees and the investors and the country all share of the riches. Of course the executives and main shareholders get outsized returns, inequality might raise, but many people see a bit, and capitalism works, kind of. This new Chinese "involutioned" capitalism is much more scary and robotic. The companies never really make money, becoming just an operation that maintains itself on minimum wage workers, all to the service of reducing prices. Shareholders don't make money, employees are semi-poor, nobody sees any returns. But the customers see cheaper prices! you say. Sure, yes, the products get cheaper, but now think of yourself as an employee not a customer. Imagine the involutioned companies triumph. Your previous company, where you had a good salary goes bust. You find a job in an involutioned company where everyone is almost poor and worked to death just to reduce prices. Your portfolio goes to shit because companies don't make money anymore.... Sure, everything's cheaper now but I'm not sure that makes it better.
  - pingou 2mo ago
    But if everything is cheaper, isn't it exactly the same as if everybody is richer? Except that it could incentive people to put their money into rent seeking businesses and increase the real estate prices for example.
  - luke5441 2mo ago
    You forgot the last part about now no one having money anymore to buy the companies products, so you go into a deflationary spiral. To solve that you'd want to increase wages by e.g. improving workers rights, giving them mandatory pensions etc. But that is scary: They might get too much power and revolt! This works for China currently for a while, because they are exporting more and more. They have realized that they need to grow internal consumption, but are not managing to grow that sufficiently.
- decimalenough 2mo ago
  The original Aalto stool, consisting of three pieces of bent wood and a circle, costs $479: https://www.finnishdesignshop.com/en-au/product/aalto-stool-60-birch https://www.finnishdesignshop.com/en-au/product/aalto-stool-... The IKEA copy, identical except that the circle is more of a triangle, costs $19: https://www.ikea.com/us/en/p/kyrre-stool-birch-60416925/ https://www.ikea.com/us/en/p/kyrre-stool-birch-60416925/ Both companies are very profitable, but I'm sure IKEA shifts a lot more units. And the Aalto stool is solid wood and will last forever, while the IKEA copy is probably laminated cardboard or something.
  - summa_tech 2mo ago
    Laminated wood veneer for legs, plywood for seat. Not as disposable as the eternal LACK, but also not bent wood.
  - esafak 2mo ago
    This is a great demonstration in the value of approximation. The IKEA is close enough for most people's tastes at a much more attractive price point.
avhception 2mo ago
I guess it depends on where you would draw the line with respect to what still constitutes "Mittelstand", but in the small-town circles where my family operated our company, outsourcing wasn't really a thing. Most of the companies were around 30 to 3000 employees, and mostly operated B2B for the automotive industry. There was exactly one company which got overly ambitious and started to emit shares. It was a big deal back in the 90s, SHARES! From our hometown! Like, you could watch it in the Ticker in the evening news if you waited long enough! But they quickly faltered when the golden 90s turned into the permanent state of crisis beginning in the 2000s. Most of the others were still family-owned, including our own (electroplating, ~130 employees), and stuck it out much longer. But we've since had to close doors, too, as have most of the others. It's a combination of things. Regulations have you in a chokehold, you can't get decent employees, and every process input from energy to equipment to real estate related costs and whatnot just cost an arm and a leg and slowly bleed you dry. Nobody here ever flew business class (except maybe these flashy idiots with their shares). The families always re-invested.
- clarionbell 2mo ago
  This seriously needs to be repeated again and again. It's not that Mittelstand got greedy. Neither did most other small and medium companies in Europe and US. They gradually became less competitive by overregulation, high input costs, and complete lack of state support. The last sometimes bordering on hostility.
  - RandomLensman 2mo ago
    There has been at least indirect state support for some by support for the automotive industry. They might have gotten squeezed as a supplier but the ecosystem got help to keep moving.
  - avhception 2mo ago
    Anecdote time re: Over-regulation: We had a side-hustle, automatic sorting machines. Mostly nuts and bolts, but other stuff, too. About 10 employees. By some miracle, it managed to survive the loss of it's biggest customer (the aforementioned electroplating company). But we had to move shop. After we got a place, the city terminated the operating permit for the building. Why? Because, you see, the company that operated the building before had it filed as "metal working", so that is what the permit said. But _sorting_ metal doesn't alter it, so the permit doesn't hold! And they wouldn't issue a new one. Fun times.
crote 2mo ago
This is why the West is getting its ass kicked in non-legacy industries. Our MBAs have internalized the idea that you "win at capitalism" by buying out your competitors, making products shitty and expensive, and making shareholders filthy rich. Their MBAs believe that it means selling the best product possible at razor-thin margins, killing your competitors by being the better choice. Everyone is always complaining about Chinese companies "stealing IP", "getting state subsidies", and "dumping products". No, they are just being better at capitalism! We bootstrapped their industry with outsourcing, and then killed our own subsidy system by retooling it to give free money to large shareholders. No wonder our companies aren't able to compete - we reward incompetence...
- izacus 2mo ago
  Somehow MBAs, our champions of capitalism, completely forgot that capitalism only really works for society when free market competition takes place. This is what's attractive about the "Mittlestand" - having a wide variety of companies competing in the same market so they push each other to improve services. 21st century consolidation is a direct opposite of that.
  - vrganj 2mo ago
    But consolidation is the inherent end game of capitalism. It's almost as if it was full of contradictions that will always result in crises and a bad way to organize a society...
    - ahartmetz 2mo ago
      Some of these contradictions can be fixed well enough by government intervention to make capitalism the best known system. It used to work pretty well for several decades.
      - vrganj 2mo ago
        Several decades being 1.8 decades since the last major crisis?

jonstewart 2mo ago

> Advancing the precedent set by Alfred, generations of Krupps would continue to develop the region through various private and public works, for almost a century into the 1920s. > > With their basic needs addressed and the workforce inculcated with the “Kruppianer spirit,” the firm crossed the fifth ring. They forged an empire that, by the late 1950s, <insert Goose meme> “What did Krupp make in the 1930s?” This was kind of an interesting article but could have been a great deal shorter and wasn’t particularly insightful.

rbinv 2mo ago
Thanks for the meme chuckle. For the uninitiated: https://i.imgflip.com/ayibmd.jpg https://i.imgflip.com/ayibmd.jpg

gyulai 2mo ago

the article was a bit long for me to read, but when i hear "mittelstand", i think "inherited wealth", regulatory capture leading to gatekeepting of access to the trades and crafts, and employees that are getting paid less than they would in larger industries in exchange for lofty blah blah about family friendliness (sitting in a weird contrast with crazy levels of bean counting when it comes to, e.g., flexible working time and vacation entitlements).

grebc 2mo ago
Lol.
camillomiller 2mo ago
[flagged]
- gyulai 2mo ago
  It was providing context which some people may find useful. The article, rather than being a strictly historical treatise, is taking the bait to propagate some narratives about the motivations behind why these companies do business the way they do. Reframe "family values" as "paying less" and see where you land on a critical appraisal. Reframe "rooted in a region" as follows: Being a relatively large fish in a relatively small pond is often strategically preferable to being a relatively small fish in a relatively big pond, if your strategy involves regulatory capture of local government and the formation of a cartel with the handful of other Mittelstand employers in a region that otherwise doesn't have much going on. Reframe "excellence in crafts" as "keeping out the competition". I've seen all of these bullshit narratives getting spun, and all of these mechanisms at play, over the last 7 years, having lived in two separate such regions in Germany. It is a scent of bullshit that is very well known to me. When I see other people in danger of being misled, I will say something, just as I will say "watch out", when I see someone about to get hit by a car.
  - RandomLensman 2mo ago
    Well, people could move to places with higher wages (e.g., cities), no? Being in a place where you could help shape local politics seems like a good move, no? What is the issue with "excellence in craft" as keeping "out the competion"? Why would anyone not want to beat the competion?

camillomiller 2mo ago

I was enjoying this until this signature sentence by Claude: >>Slowly but surely, it did, once again becoming a world-renowned brand, now separate from that of Thonet. The same town, the same factory, the same people—just a different name The moment I see this, the piece loses all of its credibility. I cannot take any of the factual informations I was enjoying as implicitly correct now, I just can’t. Authors should edit LLM help in a much stricter way. As a writer, LLMs should only be research helpers and used to check for typos and syntax mistakes. Authors, please, do better

jillesvangurp 2mo ago
I think it's more likely model creators will up their game. I've been generating some copy for our company website. I'll be honest, not all of it is great and there are clear AI slop signs. However, you can use guard rails to limit this kind of thing somewhat. I've been doing that. But the good news is that there are pretty easy to spot patterns. And LLMs are actually really good at identifying those already. It seems spotting the patterns is a lot easier for LLMs than addressing them. > As a writer, LLMs should only be research helpers and used to check for typos and syntax mistakes. Authors, please, do better I know professional writers that are definitely no longer just limiting themselves like that. I think that ship has sailed.
- keybored 2mo ago
  Everyone with a stake in AI wants that ship to have sailed.
HawtAds 2mo ago
You do know em dashes are a normal part of formal prose right? If you go through pre GPT New Yorker and the Atlantic articles, there are plenty of em dashes too.
- AdamN 2mo ago
  The New Yorker has a whole style guide. Most people aren't writing "née" or "reëlected" very often but the New Yorker keeps those formats and even has a custom typeface. Yes em-dashes are real but aside from a few NY-based magazines with real editors, writers aren't actually using them very much. I'm a bit sad because I like using them and now I think twice before doing so in case it is misinterpreted as an AI signature.

keybored 2mo ago

Reads like capitalist romanticization to me. The point about concentric circles (of care) is true e.g. for workers. If you have ownership. Not corporate-speak ownership like you feel like you are invested in outcomes but real, legal ownership. Maybe these are capitalist cooperative enterprises. Then you really have concentric circles.

barrenko 2mo ago

Post WW1, the US was a world hegemon, lent money and set low interest rates and for the past 100 years the countries of the Western EU, fattened from their ancient trade and slavery profits were engaged in a lot of delulu thinking (we could even note franco-prussian war for this). Effectively there is no job / value creation since at least the 90s, coupled with uncontrolled mass immigration, and what is going on is stagnation and eventually fall. Lento, then adagio, then allegro, then presto as nn taleb says. We can see this mindset in this summers AC discourse, doing less than Pakistan on the Hormuz situation et c., et c.

topaz0 2mo ago

Wood bending is way older than the nr 14. Plenty of that stuff in 18th c. Europe but apparently it was a common technique in lots of cultures before they had any contact with europeans too, going way back.