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Why Germany Dominates the U.S. in Innovation

142 points by r0h1n 12y ago

mschuster91 12y ago
One thing that the US definitely are better at than Germany is accepting failure. Failure in the US is expected in the startup world, whereas you'll often not even get a fucking cellphone contract once you went broke in Germany. For years.
- jwr 12y ago
  That is true not only of Germany, but of many (most?) European countries. In Poland, if your company goes bankrupt, the social stigma will be with you for years.
  - _delirium 12y ago
    In Denmark it depends on the legal structure of your business. Personal debts are much harder to discharge in bankruptcy than in the U.S., and cause much longer-lasting trouble. But it's fairly easy to set up a limited-liability company, and in that case your personal finances are insulated from what happens to the business, like in the U.S. For example if an ApS you were owner of went bankrupt, it wouldn't impact your personal credit, and you wouldn't be personally responsible for the debt. As a result it's quite common for even low-turnover one-person freelance businesses to be incorporated as an ApS rather than performed as a sole proprietor (roughly like the use of LLCs in the United States).
    - ThomPete 12y ago
      At the same time way more startups funding in Denmark are based on loans not investments and sometimes you have to personally vouch for that :)
    - danielweber 12y ago
      I was surprised to learn that, even with the restrictions on bankruptcy declaration about 10 years ago, the US still makes it very very easy to declare bankruptcy, as compared with other first-world countries.
    - bowlofpetunias 12y ago
      Same in the Netherlands. However, if the bankruptcy of the company is found to be the result of blatant mismanagement, the creditors can go after the owners personal possessions. There is no stigma attached to an entrepreneur who's company goes bankrupt, but the personal bankruptcy is a sign of failure.
    - mseebach 12y ago
      One thing is the formalities of a bankruptcy, which like most business formalities in Denmark are pretty simple to deal with - another is the social stigma. It's anecdotal, but I'd say that such a stigma definitely exists in Denmark.
  - pawelkomarnicki 12y ago
    That's only partially true about Poland. Your bankrupt company brings stigma only in case you performed some shady stuff, e.g. cheated on taxes or treated workers bad. From my experience I know that it's super hard to do business in Poland, because of specific mindset of my fellow Poles. Trying to make a startup and failing won't actually leave you with stigma.
    - bayesianhorse 12y ago
      That's probably the reason why most Polish founders are in Berlin.
      - nazgob 12y ago
        Do you have a source to support this claim?
        bayesianhorse 12y ago
        Up until recently I have heard no talk about Polish startups at all, but I always encounter programmers with a Polish background (to subsume a lot of circumstances surrounding nationality or ethnicity) in Berlin or the German scene in general. "Most" may not be correct, but it sure sounds nice :-)
  - dba7dba 12y ago
    Same in Asian countries like Japan and Korea and China. I think pretty much US is the only place where FAILURE IS AN OPTION.
- x3ro 12y ago
  My impression on the U.S. startup world has been "either you go (very) big or you die/fail". In Germany, in contrast, it is perfectly fine for a startup to earn a million or less a year, and never even aspire to earn billions, as long as it pays the bills and you employ some people. Thus I conclude that it is "harder" to fail if your expectations are not unrealistically high. Also, as Tomte has pointed out, company bankruptcy does not equal personal bankruptcy. On the other hand, I only know the U.S. startup world from what I've read, so I might be totally off there. So please correct me if I'm wrong.
  - dragonwriter 12y ago
    I think "startup" may be being used differently in those two context. Its fine in the US for a small business to not seek explosive growth and to have a steady, reasonable income and employ some people -- but that's not usually called a "startup" (around here, the term "lifestyle business" gets thrown around sometimes.) "Startup" is generally used for something that is (or seeks to be) VC funded based on a vision of investors realizing immense gains in an eventual acquisition or IPO. It sounds like its quite likely what you are calling "startup" in Germany and what is called "startup" in some US-centric contexts (like HN) are not really the same category, and that the former is broader than the latter more than what is acceptable in Germany being different.
    - pearkes 12y ago
      Agree, see my parent comment where I mention Mittelstand.
  - dragontamer 12y ago
    West Coast startups tend to have this "Big or Bust" mindset. East Coast startups can be content to grow more organically. Its New York financing vs Silicon Valley financing. Remember that Hacker News is based on YCombinator: a West Coast incubator. You'll probably never hear about the tons of small scale restaurants, small government contractors (I've seen teams of 10 or less), and one-off donut shops. But they're relatively common in the East Coast. There's a "MicroBrew Beer" restaurant every block in some areas. Its a bit different on the East Coast. There are tons of business owners that I know of, but all of them are quite small businesses. My High School math teacher owned a franchise restaurant, another high school teacher owned a potato chip company, my cousin owns a Pho shop, my uncle owns a private Sports-Medicine practice (finances are run by his wife). A lot of blue collar work (like HVAC, Roof Repair, and other household tasks) are done by contractors or small businesses. None of these businesses plan to strike it big. Its more about day-to-day operations and basic work. Naturally, you'll see more "Big or Bust" methodologies around YCombinator. The small organic growth of the East Coast startups don't really make news and are frankly... very mundane and boring.
- Tomte 12y ago
  Maybe if you personally go bankrupt. If your startup company goes bankrupt, I highly doubt it.
  - mschuster91 12y ago
    The point is how you incorporate your startup. If you do it as Einzelunternehmer/GbR to avoid having to raise 25k € just for providing the base capital, then you're fully liable for anything that happens with your personal assets. Now you have e.g. a data breach, or your entire inventory goes down in a flood/fire/accident and you're not properly insured (most private insurances will not cover your business assets, even if your business is in your home), you're out of luck. And as we're speaking of capital: in the Valley, you basically have to have a good business plan, a sales pitch and a bit of luck and you'll be bathed in cash (at least, this is my impression of reading here). In Germany, no luck obtaining a larger credit or startup financing as long as you don't put up your house or car as collateral.
    - patrickg 12y ago
      (first paragraph) That's why we now have the "small limited" company (Mini-GmbH or UG). You can start a company with limited liability with just a few bucks^H Euros.
      - mschuster91 12y ago
        The problem with the UG is that it, too, doesn't have the creditworthiness of a "real" GmbH - and we're back at square one, no viable way of getting capital except by putting up personal property as collateral.
        levosmetalo 12y ago
        So the real problem is not that it's not possible to have cheap company with liability protection, which UG suits perfectly, but being able to borrow money / get investment for a company worth 0€. Those are two totally different things.
- novalis78 12y ago
  This is quite an important point. As a German-expat in the US I marvel at the flexibility and "let's just do it and see what will happen" mentality that welcomes risk and embraces failure in the pursuit of some wild idea. In most cases these ideas turn out to be fruitless but sometimes - against all odds - they lead to amazing results.
- emsy 12y ago
  Failure with a startup and going broke are two different things. And I'd argue that the consequences of being broke are worse in the US than in Germany. Failure is not so much of an economical than a social problem in Germany. If you fail only once, you will always be the guy/girl with the idiotic idea that didn't work out. Of course, anybody could've told you that! If you succeed you will face a lot of jealousy. This leads to a culture where following your dream will earn you so much negative reactions that it's really hard to sustain.
progx 12y ago
Ah ok, they only talk about our Car Industry, as always. I don't see any other business that has "experimental software engineering" in germany. And yes we have some lighthouses, like every other country too.
- tinkerdol 12y ago
  My work in Geoinformatics could also be called "experimental software engineering".... I work out of a University of Applied Sciences near Frankfurt. Not connected to the car industry. I think the article was spot on in identifying the huge investment that goes into research in the country, although they might have strangely overemphasized the Fraunhofers (while forgetting institutions linked to Leibniz or the DLR/ESA or just the massive employment through universities such as mine...)
- this_user 12y ago
  What they don't mention is the fact that there is no German IT company of international importance. The only exception is SAP and they were founded in 1972 and IMO have a good chance of being disrupted in the near future if they don't start innovating soon. There may be some promising startups that have appeared over the last couple of years, but there is no Microsoft, Apple, Google, Facebook or anything even remotely like it.
  - lispm 12y ago
    That does not mean that there isn't lot of software being developed, just that you focus on 'international importance'. A lot of software development goes on for industries you typically don't see much of.
    - bluetomcat 12y ago
      Exactly. A lot of critical software gets written for industrial automation, and you never have a chance of seeing it on GitHub.
  - derwildemomo 12y ago
    Spot on. I'm working and living in germany, and this is one of the biggest problems, in my opinion, for the future of this country. You rarely find some startup here that is truly innovative – the fews that are usually don't get funding. It's a dead end, and I don't see it changing.
bluetomcat 12y ago
The US concentrates way too much on the consumer side of innovation, whereas Germany seeks to improve and optimize the whole cycle of its manufacturing, without necessarily aiming to put something on the shelves immediately. This makes Germany a much more predictable and less volatile economy.
- ganeumann 12y ago
  Source? You may just see the consumer innovation and not the industrial innovation. I invest primarily in B2B companies, and I think the US innovates more in this sector than any other country. If you're just thinking of incremental/internal innovation, then Germany may or may not be better than the US, but there's no widely accepted way of measuring this so any opinion is purely anecdotal.
  - adventured 12y ago
    I'm always amazed at how little understanding there seems to be about the vast nature of American manufacturing (nearly $2.5 trillion in size, it's larger than the entire UK economy by itself). Its death has been greatly exaggerated. What has happened, is due to massive gains in productivity the labor force has been reduced heavily. More manufacturing jobs have been lost to productivity gains than to China, seemingly a little known fact.
- danielweber 12y ago
  Why would "seeks to improve and optimize the whole cycle of its manufacturing" correspond to "more predictable economy"? Wouldn't "improving and optimizing the whole of manufacturing" cause even more disruptions? (I'm not arguing against creative disruption. I'm wondering how to square the two concepts.)
  - bluetomcat 12y ago
    Because, at the end, all that brings gradually better products of real value, instead of just trying out completely different ideas which are destined to be the "next big thing" in a chaotic manner, which is what happens to a large extent in the US.
sfbsfbsfb 12y ago
I'm willing to be convinced that Germany dominates in innovation but that would require a definition of 'innovation' and some data. Until then, count me skeptical.
calibraxis 12y ago
I'm fine accepting the article's conclusion, but I missed the reference to the "repeated studies" it mentions. Anyone know which these are? (Is it in the links to places like asme.org?)
adventured 12y ago
I read that article three times to make sure I wasn't missing some strong supporting evidence. I didn't see any supporting evidence anywhere. What did I miss? The only thing I ran across were very brief opinions stated as facts, and they seemed pretty outlandish, given the facts about the US economy that are easily brought forth, like for example that the US is the world's most productive manufacturer (how can that be true if German manufacturing is so superior per the article?): http://www.nam.org/Statistics-And-Data/Facts-About-Manufacturing/Landing.aspx http://www.nam.org/Statistics-And-Data/Facts-About-Manufactu...
- 300bps 12y ago
  Why Germany Dominates the U.S. in Innovation √ Linkbait headline Reading the headlines, you might think that the most urgent question about national success in innovation and growth is whether the U.S. or China should get the gold medal. √ Strawman argument True, Americans do well at inventing. The U.S. has the world’s most sophisticated system of financing radical ideas, and the results have been impressive, from Google to Facebook to Twitter. √ Content that contradicts linkbait headline Americans need to recognize that the purpose of innovation isn’t to produce wildly popular internet services. It’s to sustain productivity and employment growth in order to ensure real income expansion. √ Political agenda exposed by end of article
fjk 12y ago
The article discusses how Germany's middle class manufacturing jobs are booming while the United States is seeing a major decline in that demographic. There's a comment after the article by 'LaughingTarget' that touches on a lot of great points but I wanted to bring up this specifically: > For example, if an accountant is hired at BMW is classified as a manufacturing employee while an accountant in an accounting firm supporting Tesla Motors is classified as a service employee. Classification of jobs matters, and the article's analysis of manufacturing jobs between Germany and the US seems like an apples to oranges comparison.
- Zigurd 12y ago
  Classification of products also matters. That bump in durable goods manufacturing? That was an order for 10 submarines. Our manufacturing is highly dependent on military spending. That's not enhancing the quality of life here.
  - njharman 12y ago
    > That's not enhancing the quality of life here. Well that's unknowable. Based on the perceived quality of life of people the USA bombs/embargoes/invades, it's better to be the giver than receiver.
    - Zigurd 12y ago
      > it's better to be the giver than receiver The war spending, coming at the same time as the derivative crash, could be blamed for speeding the end of American global preeminence. That's likely to have a negative effect on quality of life, and those were avoidable errors.
spindritf 12y ago
I don't buy the premise. Anyone knows what are those "repeated studies" he doesn't cite? I can't really even imagine measuring some sort of nation-wide innovativeness. High employment in manufacturing doesn't seem like any proof of innovation to me. OK, so they make their own stuff and Americans outsource to China. Maybe that's a smarter way to go. But it has little to do with actually inventing and developing a product.
- Spearchucker 12y ago
  That's fair enough. An explanation of the widening income gap in the US (as opposed to non-widening income inequality in Germany) would be interesting.
- radva42 12y ago
  There are a lot of studies that measure not only the nation wide capacity to innovate, but all sorts of factors - political stability, business sophistications, etc. For example check the GCI: http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2013-14.pdf http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport... This report covers the entire globe. I'm not german, but I have lived around 8 years in Germany, I studied at a technical university there and worked at one of the Fraunhofer Institutes, which are mentioned in the article I have to say - they are definitely doing it right. I mean... just comparing how affordable universities are there. I am always amazed when I read stories about students in the US who graduate with $50.000 or more in debt. What I paid in Germany was around $300 per semester (for which I received also a travelling ticket for the entire transport system in the entire province... just the value of this ticket exceeds the $300) and that was about it. Later they introduced semester fees and I had to pay around 700$ per semester. And that was really high. I mean ... people were protesting and the province's government removed the fees. And it's really easy to find a part-time job in your field of studies in a high-tech cluster. In the case of my university the government spent like 2.5$ billion to extend the existing high-tech cluster so it can acommodate another 10.000 highly skilled researchers. This is all happeneing in a small city with 250k people. In areas like Stuttgart and Muenchen it's even crazier what they are doing. The only thing I am not fond about Germany right now is the high taxes. But AFAIK the government are planning in reducing the tax burden on companies to keep the economy competative. I don't know... is it easy to find a part time job in your field of studies in the US?
mastazi 12y ago
I'm sorry, I don't buy it. No data, no sources to support the claims about innovations, and the analysis is largely limited to one single industry. I'm not convinced by this article and my personal experience - I'm European and I have been to Germany many times - tells me that there are many other factors, besides innovation, to justify the good performance of the German manufacturing sector.
alexvr 12y ago
I almost had to stop reading after this sentence: "The U.S. has the world’s most sophisticated system of financing radical ideas, and the results have been impressive, from Google to Facebook to Twitter." Not one of these began as a "radical" idea. I have a ton of respect for Google, as it certainly does some radical things today, but it started out as just a better search engine. And Facebook is hardly even an idea. Don't even get me started on Twitter. They certainly provide lots of value, but the initial concepts are not radical whatsoever. Concepts/companies like solar roadways, Tesla, and SpaceX blow Facebook, Twitter, and even Google out of the water in terms of radicalness.
- josefresco 12y ago
  At least "solar roadways" has a clear purpose/need. Twitter and Facebook were/are almost completely frivolous, and only because of success have they become part of the business fabric in the US and around the world. The idea what these two services succeeded and are so "valuable" is indeed pretty radical.
  - adventured 12y ago
    Your profile lists an icq #, an email address, and a twitter handle.... You don't think there's value to networking social connections together online for ease of communication and media sharing? How else would all the things these networks do, be performed in an efficient manner? There's no value to KiK, WhatsApp, instant messaging, email etc? Because all Facebook is primarily, is a communication platform, whether you're sharing text or images or video. I think you've got it dramatically wrong. These things are worth a trillion dollars, and the value has been proven true across every culture on earth.
    - josefresco 12y ago
      That's kind of my point, these things which are seemingly frivolous at first have actually evolved into "trillion" dollar entities that we all rely on. That's pretty fucking radical. Did we all need Instagram or Snapchat a decade ago? No, but now because we all wanted these services, they have a foothold in both our personal and business worlds. My point was only that while these social networks seem obvious, and boring, they are in fact pretty radical.
josefresco 12y ago
"In the U.S., by contrast, fewer and fewer people are employed in middle-class manufacturing jobs" Isn't this kind of on purpose? I get how we're now bemoaning the loss of manufacturing in the US, but before times "got hard" the shift to a services based economy was seen as a good thing. Or at least a good thing as long as the economy was/is healthy. One could argue that it isn't, and that the loss of manufacturing caused the US economic problems but that's another discussion entirely. The article seems like it's conclusions are based on job classifications between two countries that don't tell the entire story.
- pessimizer 12y ago
  >before times "got hard" the shift to a services based economy was seen as a good thing. More sold as a good thing. The same media outlets that were pushing the 'transition' into services were part of larger conglomerates that stood to benefit from overseas manufacturing.
- drzaiusapelord 12y ago
  I'd rather have a low level white-collar job than a blue collar one. Running a lathe or changing 200 degree oil in a robotic arm kinda suck compared to rebooting servers or being a powerpoint jockey. Arguably, the white collar job has a career path. Being a lathe guy means staying a lathe guy until your overseas competitors start moving in products at half your cost. Now you're an unemployed lathe guy. Might as well beat them to the punch, move manufacturing overseas, make cheaper things, and get out of the 100 degree factory floor. Now you're both selling $5 stair balusters but yours has better marketing and design on the box and you can interact with buyers in person easily.
  - xyzzy123 12y ago
    Or a telephone sanitizer.
  - netcan 12y ago
    I would much rather be a welder or even a line worker in a factory than a call centre employee, personally. Though, I'd certainly take living in this decade to living in previous decades. I do think something has been lost though. In a healthy manufacturing area of generations past someone who was 'hardworking and reliable' could get a 'decent' job. The financial rewards, self esteem and such from these jobs were deemed adequate by the people of the times. Get over the hurdle and you can be fine. Today, 'hardworking and reliable' is not really sufficient. Those cookie cutter jobs don't exist. I think politicians are at a loss because it just isn't clear what a person needs to do to qualify them for employment in this world. Some new jobs are highly specialised, like programming. These are hard to get people in to, but at least it sounds possible to train people for them. But, how the hell do you qualify people people who are 32 and have been unemployed for the past 3 years to be social media analysts?
drcode 12y ago
This article does not site any statistic as evidence to show Germany is more innovative than the US. (You'd be excused for missing this, since they site lots of other irrelevant statistics that have no bearing on their thesis.)
netcan 12y ago
What nonsense. 'Germany innovates in order to empower workers and improve their productivity; the U.S. focuses on technologies that reduce or eliminate the need to hire those pesky wage-seeking human beings.' First, hogwash. Second this whole article is an attempt to pick a bit of this and that and get to a conclusion, like some high school debate club. Germany's manufacturing sector is more innovative than the US' at the moment. This has all sorts of reasons. They’re good at industrial engineering. The US’ software industry is by far the most innovative in the world, especially consumer facing software. Israel has a strong generic drugs industry and South Korea are great at consumer electronics. Different countries are different and if you want to draw a narrative explaining why, you’ll need to set a higher bar than this. These things are not some inevitable outcome of a policy. They are organic developments that happened. They have a history. They’re caused by culture, and luck and magic as much as and more than they are caused by the “three factors” that he lays out.
- tinkerdol 12y ago
  > They’re caused by culture, and luck and magic as much as and more than they are caused by the “three factors” Germans don't believe in luck and magic, maybe that's why they make great industrial engineers :) Although you're right that it's surely a complex process. We'll have to wait and see how much and which investments really pay off, but in the meantime it is nice to live in an environment where billions are invested (check out http://ec.europa.eu/programmes/horizon2020/ http://ec.europa.eu/programmes/horizon2020/ to read details about a new European wide program).
  - fennecfoxen 12y ago
    It bothers me a bit when people (politicians, supporters, big business guys) throw around big numbers about how much has been Invested in something. Investing billions is easy. Getting billions in return from your investment, now, that's quite a bit harder. Investing less money for the same return, also hard. Anyway, these billions should be counted on the negative side of things, is the point. Tell me instead of the return on your investment!
marknutter 12y ago
Because Germany boldly pushed forward to innovate a commercially viable electric car oh wait never mind..
- arethuza 12y ago
  I'm not disagreeing that the article is a bit silly, but electric cars aren't the best thing to pick: http://www.bmw.co.uk/en_GB/new-vehicles/bmw-i/i3/2013/start.html http://www.bmw.co.uk/en_GB/new-vehicles/bmw-i/i3/2013/start.... NB The i3 has been getting great reviews and is only £25K or so in the UK after the £5K you get back from HMG. Edit: I just checked and a base Tesla Model S is £50K after the same rebate - so I don't think they are competing.
  - marknutter 12y ago
    Does the Tesla not pre-date the I3?
    - Zigurd 12y ago
      Not by a significant margin, and the i3 has beat Tesla to market in lower-priced electric cars. One could also argue that the CRP bodies in the i-series are a generation ahead of the use of aluminum in car bodies.
      - marknutter 12y ago
        I'm talking about the Tesla Roadster which is what caused the automobile industry to take electric cars seriously. Without the Tesla the i3 would not exist today.
        arethuza 12y ago
        Not sure about that - BMW have been advertising the i3 and i8 for a long time and their "i Project" that led to the creation of these models was started in 2007, which is before the Tesla roadster was on the market: http://www.bmwgroup.com/e/0_0_www_bmwgroup_com/forschung_entwicklung/mobilitaet_der_zukunft/project_i/project_i.html http://www.bmwgroup.com/e/0_0_www_bmwgroup_com/forschung_ent...
marknutter 12y ago
"Why articles that start with 'Why' are not worth reading"
deleted 12y ago
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lispm 12y ago
This chart may explain what the author thinks of: http://www.finfacts.ie/irishfinancenews/article_1025980.shtml http://www.finfacts.ie/irishfinancenews/article_1025980.shtm... See the number of 'hidden champions' in Germany, a country with 1/4 the US population.
- morgante 12y ago
  To be honest, I don't see why having "hidden champions" is a desirable thing. The criteria: 1. is among the top three in its global market or is number 1 on its continent 2. has less than $5bn in revenue 3. and is little known to the general public. I'm certain the US has a plethora of companies which meet the first criterion, but we (rightfully) fail on the second and third. What is advantageous about a business culture where successful companies languish in relative unprofitability and/or obscurity?
  - lispm 12y ago
    You get family owned companies in tiny rural German towns who stay there for hundreds of years and make hundreds of millions in revenue. They provide stable employment, excellent jobs, excellent education, ... A newer example is Herrenknecht. In the town of Schwanau - population 6807. Herrenknecht made a little over one billion Euro in revenue in 2012. Their business: huge tunnel boring machines. http://www.newyorker.com/reporting/2008/09/15/080915fa_fact_bilger http://www.newyorker.com/reporting/2008/09/15/080915fa_fact_... A list of their projects: http://www.soic.de/tunnelbohrmaschinen_herrenknecht.php http://www.soic.de/tunnelbohrmaschinen_herrenknecht.php Herrenknecht at work in New York: http://www.tunneltalk.com/East-Side-Access-Mar11-Queens-TBM-Launch.php http://www.tunneltalk.com/East-Side-Access-Mar11-Queens-TBM-... I find this pretty exciting.
danvoell 12y ago
IMO The reason fewer and fewer people are employed in middle-class manufacturing jobs is because of innovation. The automation (innovation) in today's machinery means that manufacturers mostly need people with little technical knowledge to push buttons and grab parts for $10 an hour. They don't need as many technical machinists and machine operators who got middle class salaries. Some of these middle-class jobs are overseas but for the most part they are just gone.
umrashrf 12y ago
Because there's no tuition fees; period. US schools are just mere businesses.
Im_Talking 12y ago
Because Germans are not as religious as Americans.
- bayesianhorse 12y ago
  I don't agree necessarily both on religiosity and on that being a cause for performance or innovation. I'll grant you that in the U.S. there are a lot more arguments about religion and it is tighter bound to politics. You will find masses of devout Christians all over Germany, but they usually don't go out bullying school administrations into some bs about creationism.
  - Im_Talking 12y ago
    The more the people's lives are dominated by the religious, the less innovation there is. We only need to look at the Islamic countries to see evidence of this.
guard-of-terra 12y ago
Are Fraunhofer Society the same guys who terrorized the whole open source community for the most part of 00s with the ill-written MP3 license? Maybe they understand innovation but no kudos to them for that.
Eye_of_Mordor 12y ago
Google/Facebook/Twitter - yeah that took years of scientific study and research. Weren't they all started by 2 people with a great idea? Truth is, US 'innovation' is all about ideas, whereas a high level of collaborative intelligence is used in Germany.
morgante 12y ago
> Americans need to recognize that the purpose of innovation is ... to sustain productivity and employment growth in order to ensure real income expansion. That's a highly dubious criterion, one which Germany's inelastic labor market certainly has an advantage in. Since strong unions make it much harder to lay off employees in Germany, German manufacturers have substantially less incentive to invest in labor-saving innovation. Their American counterparts do, which contributes to our GDP continuing to grow steadily. Also, US manufacturing is certainly bigger than Germany's—it's just taken as a percentage out of a bigger whole: the US GDP per capita is nearly $10k higher than Germany's. [1] For the rest of us, it's well-accepted that one of the key drivers and outcomes of innovation is to increase output without increasing factors of production, including labor. Put simply, a more innovative society is almost certainly one that's losing jobs (particularly jobs in traditional sectors). Keynes, a favorite of socialists and liberals, absolutely acknowledged that the expected outcome of technical innovation is less and less work. [2] Though we've continued to invent new jobs for people displaced by disruption ("social media manager"), it's completely expected that employment is lagging in traditional sectors like manufacturing. By reasonable criteria, the US dominates Germany in innovation. We innovate people out of jobs. 1: http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_... 2: http://www.marxists.org/reference/subject/economics/keynes/1930/our-grandchildren.htm http://www.marxists.org/reference/subject/economics/keynes/1...
jey 12y ago
Possible interpretation: Germans engineer, but Americans invent. I imagine the most successful German companies are more like GE and IBM and not like Google, Apple, or Uber.
squozzer 12y ago
I wouldn't wind myself up too hard about something in HBR. HBR's editorial policy seems to boil down to the following: 1) If America sucks at something, it's because Americans are dolts and/or the US government is run by incompetents. 2) If American is good at something, it's because American businessmen are geniuses whose excrement tastes like truffles. It's possible that both 1 and 2 are true for a given piece one might find on HBR, but their pattern suggests propaganda, and we already have Fox News, thankyouverymuch.
tsotha 12y ago
Nobody's ever come up with a reasonable way to measure "innovation", so right off the bat you know this article is built on a shaky premise. As to manufacturing, sure, the German manufacturing sector is larger as a percentage of GDP, but you'd expect that, as the German government subsidizes manufacturing to a greater extent that the US (particularly in the area of training).

142 points by r0h1n 12y ago

One thing that the US definitely are better at than Germany is accepting failure. Failure in the US is expected in the startup world, whereas you'll often not even get a fucking cellphone contract once you went broke in Germany. For years.

jwr 12y ago
That is true not only of Germany, but of many (most?) European countries. In Poland, if your company goes bankrupt, the social stigma will be with you for years.
- _delirium 12y ago
  In Denmark it depends on the legal structure of your business. Personal debts are much harder to discharge in bankruptcy than in the U.S., and cause much longer-lasting trouble. But it's fairly easy to set up a limited-liability company, and in that case your personal finances are insulated from what happens to the business, like in the U.S. For example if an ApS you were owner of went bankrupt, it wouldn't impact your personal credit, and you wouldn't be personally responsible for the debt. As a result it's quite common for even low-turnover one-person freelance businesses to be incorporated as an ApS rather than performed as a sole proprietor (roughly like the use of LLCs in the United States).
  - ThomPete 12y ago
    At the same time way more startups funding in Denmark are based on loans not investments and sometimes you have to personally vouch for that :)
  - danielweber 12y ago
    I was surprised to learn that, even with the restrictions on bankruptcy declaration about 10 years ago, the US still makes it very very easy to declare bankruptcy, as compared with other first-world countries.
  - bowlofpetunias 12y ago
    Same in the Netherlands. However, if the bankruptcy of the company is found to be the result of blatant mismanagement, the creditors can go after the owners personal possessions. There is no stigma attached to an entrepreneur who's company goes bankrupt, but the personal bankruptcy is a sign of failure.
  - mseebach 12y ago
    One thing is the formalities of a bankruptcy, which like most business formalities in Denmark are pretty simple to deal with - another is the social stigma. It's anecdotal, but I'd say that such a stigma definitely exists in Denmark.
- pawelkomarnicki 12y ago
  That's only partially true about Poland. Your bankrupt company brings stigma only in case you performed some shady stuff, e.g. cheated on taxes or treated workers bad. From my experience I know that it's super hard to do business in Poland, because of specific mindset of my fellow Poles. Trying to make a startup and failing won't actually leave you with stigma.
  - bayesianhorse 12y ago
    That's probably the reason why most Polish founders are in Berlin.
    - nazgob 12y ago
      Do you have a source to support this claim?
      - bayesianhorse 12y ago
        Up until recently I have heard no talk about Polish startups at all, but I always encounter programmers with a Polish background (to subsume a lot of circumstances surrounding nationality or ethnicity) in Berlin or the German scene in general. "Most" may not be correct, but it sure sounds nice :-)
- dba7dba 12y ago
  Same in Asian countries like Japan and Korea and China. I think pretty much US is the only place where FAILURE IS AN OPTION.
x3ro 12y ago
My impression on the U.S. startup world has been "either you go (very) big or you die/fail". In Germany, in contrast, it is perfectly fine for a startup to earn a million or less a year, and never even aspire to earn billions, as long as it pays the bills and you employ some people. Thus I conclude that it is "harder" to fail if your expectations are not unrealistically high. Also, as Tomte has pointed out, company bankruptcy does not equal personal bankruptcy. On the other hand, I only know the U.S. startup world from what I've read, so I might be totally off there. So please correct me if I'm wrong.
- dragonwriter 12y ago
  I think "startup" may be being used differently in those two context. Its fine in the US for a small business to not seek explosive growth and to have a steady, reasonable income and employ some people -- but that's not usually called a "startup" (around here, the term "lifestyle business" gets thrown around sometimes.) "Startup" is generally used for something that is (or seeks to be) VC funded based on a vision of investors realizing immense gains in an eventual acquisition or IPO. It sounds like its quite likely what you are calling "startup" in Germany and what is called "startup" in some US-centric contexts (like HN) are not really the same category, and that the former is broader than the latter more than what is acceptable in Germany being different.
  - pearkes 12y ago
    Agree, see my parent comment where I mention Mittelstand.
- dragontamer 12y ago
  West Coast startups tend to have this "Big or Bust" mindset. East Coast startups can be content to grow more organically. Its New York financing vs Silicon Valley financing. Remember that Hacker News is based on YCombinator: a West Coast incubator. You'll probably never hear about the tons of small scale restaurants, small government contractors (I've seen teams of 10 or less), and one-off donut shops. But they're relatively common in the East Coast. There's a "MicroBrew Beer" restaurant every block in some areas. Its a bit different on the East Coast. There are tons of business owners that I know of, but all of them are quite small businesses. My High School math teacher owned a franchise restaurant, another high school teacher owned a potato chip company, my cousin owns a Pho shop, my uncle owns a private Sports-Medicine practice (finances are run by his wife). A lot of blue collar work (like HVAC, Roof Repair, and other household tasks) are done by contractors or small businesses. None of these businesses plan to strike it big. Its more about day-to-day operations and basic work. Naturally, you'll see more "Big or Bust" methodologies around YCombinator. The small organic growth of the East Coast startups don't really make news and are frankly... very mundane and boring.
Tomte 12y ago
Maybe if you personally go bankrupt. If your startup company goes bankrupt, I highly doubt it.
- mschuster91 12y ago
  The point is how you incorporate your startup. If you do it as Einzelunternehmer/GbR to avoid having to raise 25k € just for providing the base capital, then you're fully liable for anything that happens with your personal assets. Now you have e.g. a data breach, or your entire inventory goes down in a flood/fire/accident and you're not properly insured (most private insurances will not cover your business assets, even if your business is in your home), you're out of luck. And as we're speaking of capital: in the Valley, you basically have to have a good business plan, a sales pitch and a bit of luck and you'll be bathed in cash (at least, this is my impression of reading here). In Germany, no luck obtaining a larger credit or startup financing as long as you don't put up your house or car as collateral.
  - patrickg 12y ago
    (first paragraph) That's why we now have the "small limited" company (Mini-GmbH or UG). You can start a company with limited liability with just a few bucks^H Euros.
    - mschuster91 12y ago
      The problem with the UG is that it, too, doesn't have the creditworthiness of a "real" GmbH - and we're back at square one, no viable way of getting capital except by putting up personal property as collateral.
      - levosmetalo 12y ago
        So the real problem is not that it's not possible to have cheap company with liability protection, which UG suits perfectly, but being able to borrow money / get investment for a company worth 0€. Those are two totally different things.
novalis78 12y ago
This is quite an important point. As a German-expat in the US I marvel at the flexibility and "let's just do it and see what will happen" mentality that welcomes risk and embraces failure in the pursuit of some wild idea. In most cases these ideas turn out to be fruitless but sometimes - against all odds - they lead to amazing results.
emsy 12y ago
Failure with a startup and going broke are two different things. And I'd argue that the consequences of being broke are worse in the US than in Germany. Failure is not so much of an economical than a social problem in Germany. If you fail only once, you will always be the guy/girl with the idiotic idea that didn't work out. Of course, anybody could've told you that! If you succeed you will face a lot of jealousy. This leads to a culture where following your dream will earn you so much negative reactions that it's really hard to sustain.

progx 12y ago

Ah ok, they only talk about our Car Industry, as always. I don't see any other business that has "experimental software engineering" in germany. And yes we have some lighthouses, like every other country too.

tinkerdol 12y ago
My work in Geoinformatics could also be called "experimental software engineering".... I work out of a University of Applied Sciences near Frankfurt. Not connected to the car industry. I think the article was spot on in identifying the huge investment that goes into research in the country, although they might have strangely overemphasized the Fraunhofers (while forgetting institutions linked to Leibniz or the DLR/ESA or just the massive employment through universities such as mine...)
this_user 12y ago
What they don't mention is the fact that there is no German IT company of international importance. The only exception is SAP and they were founded in 1972 and IMO have a good chance of being disrupted in the near future if they don't start innovating soon. There may be some promising startups that have appeared over the last couple of years, but there is no Microsoft, Apple, Google, Facebook or anything even remotely like it.
- lispm 12y ago
  That does not mean that there isn't lot of software being developed, just that you focus on 'international importance'. A lot of software development goes on for industries you typically don't see much of.
  - bluetomcat 12y ago
    Exactly. A lot of critical software gets written for industrial automation, and you never have a chance of seeing it on GitHub.
- derwildemomo 12y ago
  Spot on. I'm working and living in germany, and this is one of the biggest problems, in my opinion, for the future of this country. You rarely find some startup here that is truly innovative – the fews that are usually don't get funding. It's a dead end, and I don't see it changing.

bluetomcat 12y ago

The US concentrates way too much on the consumer side of innovation, whereas Germany seeks to improve and optimize the whole cycle of its manufacturing, without necessarily aiming to put something on the shelves immediately. This makes Germany a much more predictable and less volatile economy.

ganeumann 12y ago
Source? You may just see the consumer innovation and not the industrial innovation. I invest primarily in B2B companies, and I think the US innovates more in this sector than any other country. If you're just thinking of incremental/internal innovation, then Germany may or may not be better than the US, but there's no widely accepted way of measuring this so any opinion is purely anecdotal.
- adventured 12y ago
  I'm always amazed at how little understanding there seems to be about the vast nature of American manufacturing (nearly $2.5 trillion in size, it's larger than the entire UK economy by itself). Its death has been greatly exaggerated. What has happened, is due to massive gains in productivity the labor force has been reduced heavily. More manufacturing jobs have been lost to productivity gains than to China, seemingly a little known fact.
danielweber 12y ago
Why would "seeks to improve and optimize the whole cycle of its manufacturing" correspond to "more predictable economy"? Wouldn't "improving and optimizing the whole of manufacturing" cause even more disruptions? (I'm not arguing against creative disruption. I'm wondering how to square the two concepts.)
- bluetomcat 12y ago
  Because, at the end, all that brings gradually better products of real value, instead of just trying out completely different ideas which are destined to be the "next big thing" in a chaotic manner, which is what happens to a large extent in the US.

sfbsfbsfb 12y ago

I'm willing to be convinced that Germany dominates in innovation but that would require a definition of 'innovation' and some data. Until then, count me skeptical.

calibraxis 12y ago

I'm fine accepting the article's conclusion, but I missed the reference to the "repeated studies" it mentions. Anyone know which these are? (Is it in the links to places like asme.org?)

adventured 12y ago

I read that article three times to make sure I wasn't missing some strong supporting evidence. I didn't see any supporting evidence anywhere. What did I miss? The only thing I ran across were very brief opinions stated as facts, and they seemed pretty outlandish, given the facts about the US economy that are easily brought forth, like for example that the US is the world's most productive manufacturer (how can that be true if German manufacturing is so superior per the article?): http://www.nam.org/Statistics-And-Data/Facts-About-Manufacturing/Landing.aspx http://www.nam.org/Statistics-And-Data/Facts-About-Manufactu...

300bps 12y ago
Why Germany Dominates the U.S. in Innovation √ Linkbait headline Reading the headlines, you might think that the most urgent question about national success in innovation and growth is whether the U.S. or China should get the gold medal. √ Strawman argument True, Americans do well at inventing. The U.S. has the world’s most sophisticated system of financing radical ideas, and the results have been impressive, from Google to Facebook to Twitter. √ Content that contradicts linkbait headline Americans need to recognize that the purpose of innovation isn’t to produce wildly popular internet services. It’s to sustain productivity and employment growth in order to ensure real income expansion. √ Political agenda exposed by end of article

fjk 12y ago

The article discusses how Germany's middle class manufacturing jobs are booming while the United States is seeing a major decline in that demographic. There's a comment after the article by 'LaughingTarget' that touches on a lot of great points but I wanted to bring up this specifically: > For example, if an accountant is hired at BMW is classified as a manufacturing employee while an accountant in an accounting firm supporting Tesla Motors is classified as a service employee. Classification of jobs matters, and the article's analysis of manufacturing jobs between Germany and the US seems like an apples to oranges comparison.

Zigurd 12y ago
Classification of products also matters. That bump in durable goods manufacturing? That was an order for 10 submarines. Our manufacturing is highly dependent on military spending. That's not enhancing the quality of life here.
- njharman 12y ago
  > That's not enhancing the quality of life here. Well that's unknowable. Based on the perceived quality of life of people the USA bombs/embargoes/invades, it's better to be the giver than receiver.
  - Zigurd 12y ago
    > it's better to be the giver than receiver The war spending, coming at the same time as the derivative crash, could be blamed for speeding the end of American global preeminence. That's likely to have a negative effect on quality of life, and those were avoidable errors.

spindritf 12y ago

I don't buy the premise. Anyone knows what are those "repeated studies" he doesn't cite? I can't really even imagine measuring some sort of nation-wide innovativeness. High employment in manufacturing doesn't seem like any proof of innovation to me. OK, so they make their own stuff and Americans outsource to China. Maybe that's a smarter way to go. But it has little to do with actually inventing and developing a product.

Spearchucker 12y ago
That's fair enough. An explanation of the widening income gap in the US (as opposed to non-widening income inequality in Germany) would be interesting.
radva42 12y ago
There are a lot of studies that measure not only the nation wide capacity to innovate, but all sorts of factors - political stability, business sophistications, etc. For example check the GCI: http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2013-14.pdf http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport... This report covers the entire globe. I'm not german, but I have lived around 8 years in Germany, I studied at a technical university there and worked at one of the Fraunhofer Institutes, which are mentioned in the article I have to say - they are definitely doing it right. I mean... just comparing how affordable universities are there. I am always amazed when I read stories about students in the US who graduate with $50.000 or more in debt. What I paid in Germany was around $300 per semester (for which I received also a travelling ticket for the entire transport system in the entire province... just the value of this ticket exceeds the $300) and that was about it. Later they introduced semester fees and I had to pay around 700$ per semester. And that was really high. I mean ... people were protesting and the province's government removed the fees. And it's really easy to find a part-time job in your field of studies in a high-tech cluster. In the case of my university the government spent like 2.5$ billion to extend the existing high-tech cluster so it can acommodate another 10.000 highly skilled researchers. This is all happeneing in a small city with 250k people. In areas like Stuttgart and Muenchen it's even crazier what they are doing. The only thing I am not fond about Germany right now is the high taxes. But AFAIK the government are planning in reducing the tax burden on companies to keep the economy competative. I don't know... is it easy to find a part time job in your field of studies in the US?

mastazi 12y ago

I'm sorry, I don't buy it. No data, no sources to support the claims about innovations, and the analysis is largely limited to one single industry. I'm not convinced by this article and my personal experience - I'm European and I have been to Germany many times - tells me that there are many other factors, besides innovation, to justify the good performance of the German manufacturing sector.

alexvr 12y ago

I almost had to stop reading after this sentence: "The U.S. has the world’s most sophisticated system of financing radical ideas, and the results have been impressive, from Google to Facebook to Twitter." Not one of these began as a "radical" idea. I have a ton of respect for Google, as it certainly does some radical things today, but it started out as just a better search engine. And Facebook is hardly even an idea. Don't even get me started on Twitter. They certainly provide lots of value, but the initial concepts are not radical whatsoever. Concepts/companies like solar roadways, Tesla, and SpaceX blow Facebook, Twitter, and even Google out of the water in terms of radicalness.

josefresco 12y ago
At least "solar roadways" has a clear purpose/need. Twitter and Facebook were/are almost completely frivolous, and only because of success have they become part of the business fabric in the US and around the world. The idea what these two services succeeded and are so "valuable" is indeed pretty radical.
- adventured 12y ago
  Your profile lists an icq #, an email address, and a twitter handle.... You don't think there's value to networking social connections together online for ease of communication and media sharing? How else would all the things these networks do, be performed in an efficient manner? There's no value to KiK, WhatsApp, instant messaging, email etc? Because all Facebook is primarily, is a communication platform, whether you're sharing text or images or video. I think you've got it dramatically wrong. These things are worth a trillion dollars, and the value has been proven true across every culture on earth.
  - josefresco 12y ago
    That's kind of my point, these things which are seemingly frivolous at first have actually evolved into "trillion" dollar entities that we all rely on. That's pretty fucking radical. Did we all need Instagram or Snapchat a decade ago? No, but now because we all wanted these services, they have a foothold in both our personal and business worlds. My point was only that while these social networks seem obvious, and boring, they are in fact pretty radical.

josefresco 12y ago

"In the U.S., by contrast, fewer and fewer people are employed in middle-class manufacturing jobs" Isn't this kind of on purpose? I get how we're now bemoaning the loss of manufacturing in the US, but before times "got hard" the shift to a services based economy was seen as a good thing. Or at least a good thing as long as the economy was/is healthy. One could argue that it isn't, and that the loss of manufacturing caused the US economic problems but that's another discussion entirely. The article seems like it's conclusions are based on job classifications between two countries that don't tell the entire story.

pessimizer 12y ago
>before times "got hard" the shift to a services based economy was seen as a good thing. More sold as a good thing. The same media outlets that were pushing the 'transition' into services were part of larger conglomerates that stood to benefit from overseas manufacturing.
drzaiusapelord 12y ago
I'd rather have a low level white-collar job than a blue collar one. Running a lathe or changing 200 degree oil in a robotic arm kinda suck compared to rebooting servers or being a powerpoint jockey. Arguably, the white collar job has a career path. Being a lathe guy means staying a lathe guy until your overseas competitors start moving in products at half your cost. Now you're an unemployed lathe guy. Might as well beat them to the punch, move manufacturing overseas, make cheaper things, and get out of the 100 degree factory floor. Now you're both selling $5 stair balusters but yours has better marketing and design on the box and you can interact with buyers in person easily.
- xyzzy123 12y ago
  Or a telephone sanitizer.
- netcan 12y ago
  I would much rather be a welder or even a line worker in a factory than a call centre employee, personally. Though, I'd certainly take living in this decade to living in previous decades. I do think something has been lost though. In a healthy manufacturing area of generations past someone who was 'hardworking and reliable' could get a 'decent' job. The financial rewards, self esteem and such from these jobs were deemed adequate by the people of the times. Get over the hurdle and you can be fine. Today, 'hardworking and reliable' is not really sufficient. Those cookie cutter jobs don't exist. I think politicians are at a loss because it just isn't clear what a person needs to do to qualify them for employment in this world. Some new jobs are highly specialised, like programming. These are hard to get people in to, but at least it sounds possible to train people for them. But, how the hell do you qualify people people who are 32 and have been unemployed for the past 3 years to be social media analysts?

drcode 12y ago

This article does not site any statistic as evidence to show Germany is more innovative than the US. (You'd be excused for missing this, since they site lots of other irrelevant statistics that have no bearing on their thesis.)

netcan 12y ago

What nonsense. 'Germany innovates in order to empower workers and improve their productivity; the U.S. focuses on technologies that reduce or eliminate the need to hire those pesky wage-seeking human beings.' First, hogwash. Second this whole article is an attempt to pick a bit of this and that and get to a conclusion, like some high school debate club. Germany's manufacturing sector is more innovative than the US' at the moment. This has all sorts of reasons. They’re good at industrial engineering. The US’ software industry is by far the most innovative in the world, especially consumer facing software. Israel has a strong generic drugs industry and South Korea are great at consumer electronics. Different countries are different and if you want to draw a narrative explaining why, you’ll need to set a higher bar than this. These things are not some inevitable outcome of a policy. They are organic developments that happened. They have a history. They’re caused by culture, and luck and magic as much as and more than they are caused by the “three factors” that he lays out.

tinkerdol 12y ago
> They’re caused by culture, and luck and magic as much as and more than they are caused by the “three factors” Germans don't believe in luck and magic, maybe that's why they make great industrial engineers :) Although you're right that it's surely a complex process. We'll have to wait and see how much and which investments really pay off, but in the meantime it is nice to live in an environment where billions are invested (check out http://ec.europa.eu/programmes/horizon2020/ http://ec.europa.eu/programmes/horizon2020/ to read details about a new European wide program).
- fennecfoxen 12y ago
  It bothers me a bit when people (politicians, supporters, big business guys) throw around big numbers about how much has been Invested in something. Investing billions is easy. Getting billions in return from your investment, now, that's quite a bit harder. Investing less money for the same return, also hard. Anyway, these billions should be counted on the negative side of things, is the point. Tell me instead of the return on your investment!

marknutter 12y ago

Because Germany boldly pushed forward to innovate a commercially viable electric car oh wait never mind..

arethuza 12y ago
I'm not disagreeing that the article is a bit silly, but electric cars aren't the best thing to pick: http://www.bmw.co.uk/en_GB/new-vehicles/bmw-i/i3/2013/start.html http://www.bmw.co.uk/en_GB/new-vehicles/bmw-i/i3/2013/start.... NB The i3 has been getting great reviews and is only £25K or so in the UK after the £5K you get back from HMG. Edit: I just checked and a base Tesla Model S is £50K after the same rebate - so I don't think they are competing.
- marknutter 12y ago
  Does the Tesla not pre-date the I3?
  - Zigurd 12y ago
    Not by a significant margin, and the i3 has beat Tesla to market in lower-priced electric cars. One could also argue that the CRP bodies in the i-series are a generation ahead of the use of aluminum in car bodies.
    - marknutter 12y ago
      I'm talking about the Tesla Roadster which is what caused the automobile industry to take electric cars seriously. Without the Tesla the i3 would not exist today.
      - arethuza 12y ago
        Not sure about that - BMW have been advertising the i3 and i8 for a long time and their "i Project" that led to the creation of these models was started in 2007, which is before the Tesla roadster was on the market: http://www.bmwgroup.com/e/0_0_www_bmwgroup_com/forschung_entwicklung/mobilitaet_der_zukunft/project_i/project_i.html http://www.bmwgroup.com/e/0_0_www_bmwgroup_com/forschung_ent...

marknutter 12y ago

"Why articles that start with 'Why' are not worth reading"

deleted 12y ago

[deleted]

lispm 12y ago

This chart may explain what the author thinks of: http://www.finfacts.ie/irishfinancenews/article_1025980.shtml http://www.finfacts.ie/irishfinancenews/article_1025980.shtm... See the number of 'hidden champions' in Germany, a country with 1/4 the US population.

morgante 12y ago
To be honest, I don't see why having "hidden champions" is a desirable thing. The criteria: 1. is among the top three in its global market or is number 1 on its continent 2. has less than $5bn in revenue 3. and is little known to the general public. I'm certain the US has a plethora of companies which meet the first criterion, but we (rightfully) fail on the second and third. What is advantageous about a business culture where successful companies languish in relative unprofitability and/or obscurity?
- lispm 12y ago
  You get family owned companies in tiny rural German towns who stay there for hundreds of years and make hundreds of millions in revenue. They provide stable employment, excellent jobs, excellent education, ... A newer example is Herrenknecht. In the town of Schwanau - population 6807. Herrenknecht made a little over one billion Euro in revenue in 2012. Their business: huge tunnel boring machines. http://www.newyorker.com/reporting/2008/09/15/080915fa_fact_bilger http://www.newyorker.com/reporting/2008/09/15/080915fa_fact_... A list of their projects: http://www.soic.de/tunnelbohrmaschinen_herrenknecht.php http://www.soic.de/tunnelbohrmaschinen_herrenknecht.php Herrenknecht at work in New York: http://www.tunneltalk.com/East-Side-Access-Mar11-Queens-TBM-Launch.php http://www.tunneltalk.com/East-Side-Access-Mar11-Queens-TBM-... I find this pretty exciting.

danvoell 12y ago

IMO The reason fewer and fewer people are employed in middle-class manufacturing jobs is because of innovation. The automation (innovation) in today's machinery means that manufacturers mostly need people with little technical knowledge to push buttons and grab parts for $10 an hour. They don't need as many technical machinists and machine operators who got middle class salaries. Some of these middle-class jobs are overseas but for the most part they are just gone.

umrashrf 12y ago

Because there's no tuition fees; period. US schools are just mere businesses.

Im_Talking 12y ago

Because Germans are not as religious as Americans.

bayesianhorse 12y ago
I don't agree necessarily both on religiosity and on that being a cause for performance or innovation. I'll grant you that in the U.S. there are a lot more arguments about religion and it is tighter bound to politics. You will find masses of devout Christians all over Germany, but they usually don't go out bullying school administrations into some bs about creationism.
- Im_Talking 12y ago
  The more the people's lives are dominated by the religious, the less innovation there is. We only need to look at the Islamic countries to see evidence of this.

guard-of-terra 12y ago

Are Fraunhofer Society the same guys who terrorized the whole open source community for the most part of 00s with the ill-written MP3 license? Maybe they understand innovation but no kudos to them for that.

Eye_of_Mordor 12y ago

Google/Facebook/Twitter - yeah that took years of scientific study and research. Weren't they all started by 2 people with a great idea? Truth is, US 'innovation' is all about ideas, whereas a high level of collaborative intelligence is used in Germany.

morgante 12y ago

> Americans need to recognize that the purpose of innovation is ... to sustain productivity and employment growth in order to ensure real income expansion. That's a highly dubious criterion, one which Germany's inelastic labor market certainly has an advantage in. Since strong unions make it much harder to lay off employees in Germany, German manufacturers have substantially less incentive to invest in labor-saving innovation. Their American counterparts do, which contributes to our GDP continuing to grow steadily. Also, US manufacturing is certainly bigger than Germany's—it's just taken as a percentage out of a bigger whole: the US GDP per capita is nearly $10k higher than Germany's. [1] For the rest of us, it's well-accepted that one of the key drivers and outcomes of innovation is to increase output without increasing factors of production, including labor. Put simply, a more innovative society is almost certainly one that's losing jobs (particularly jobs in traditional sectors). Keynes, a favorite of socialists and liberals, absolutely acknowledged that the expected outcome of technical innovation is less and less work. [2] Though we've continued to invent new jobs for people displaced by disruption ("social media manager"), it's completely expected that employment is lagging in traditional sectors like manufacturing. By reasonable criteria, the US dominates Germany in innovation. We innovate people out of jobs. 1: http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_... 2: http://www.marxists.org/reference/subject/economics/keynes/1930/our-grandchildren.htm http://www.marxists.org/reference/subject/economics/keynes/1...

jey 12y ago

Possible interpretation: Germans engineer, but Americans invent. I imagine the most successful German companies are more like GE and IBM and not like Google, Apple, or Uber.

squozzer 12y ago

I wouldn't wind myself up too hard about something in HBR. HBR's editorial policy seems to boil down to the following: 1) If America sucks at something, it's because Americans are dolts and/or the US government is run by incompetents. 2) If American is good at something, it's because American businessmen are geniuses whose excrement tastes like truffles. It's possible that both 1 and 2 are true for a given piece one might find on HBR, but their pattern suggests propaganda, and we already have Fox News, thankyouverymuch.

tsotha 12y ago

Nobody's ever come up with a reasonable way to measure "innovation", so right off the bat you know this article is built on a shaky premise. As to manufacturing, sure, the German manufacturing sector is larger as a percentage of GDP, but you'd expect that, as the German government subsidizes manufacturing to a greater extent that the US (particularly in the area of training).