The authors examples of “Digital Mittelstand” companies are not businesses at all but tiny “creator economy” side projects.
These do not scale to 30% of GDP in the same way high value B2B industrial equipment does (in manufacturing you happily pay $100,000 for a piece of machinery because it can turn inputs into more valuable outputs at scale).
Instead of coming up with incorrect ideas about what the government should “encourage” from the top down, what if European elites focused on cooperating more with their neighbors to open more opportunities and meanwhile let the peasants (the market) figure out the most productive and profitable uses of their time.
If Europeans can’t figure out new valuable areas where they can contribute to the world, than their system isn’t as clever or morally righteous or fantastic as they think it is. I believe if allowed the opportunity, the people would find this positive-sum value to be created. Who do you think founded all the Mittelstand in the first place?
Yes, but what if the big-software type economy isn't actually that useful?
Maybe you can grow it to 30% of GDP if you start doing a bunch of bad stuff, but if it can be replaced by open source local stuff-- if it's possible to simply kill facebook, Microsoft etc. and replace them with Linux together with a couple of not incredibly expensive software packages developed to provide a substitute, then why should we have a big-software economy?
I think this is more the idea. The interesting thing isn't to build a European Facebook or an EU SaaS economy, it's to kill the whole concept, globally.
> Maybe you can grow it to 30% of GDP if you start doing a bunch of bad stuff, but if it can be replaced by open source local stuff-- if it's possible to simply kill facebook, Microsoft etc. and replace them with Linux together with a couple of not incredibly expensive software packages developed to provide a substitute, then why should we have a big-software economy?
People have been saying this for twenty or thirty years, and in the meantime the economy has coalesced further into fewer American megacorps. It's a mirage. Things do not work that way.
(AI is going to be exactly the same: the huge corporate valuations are predicated on there being exactly one big AI company which takes a significant chunk of value from all word-based work being done today)
This is by design. US government isn't gonna kneecap it's most valuable companies now, since they're also monopolizing the international tech markets including the European one, and as long as China isn't taming its own monopolistic giants, then the US has no incentive to do it to themselves considering the economic war they're in now.
The US government threw the book at Microsoft in the 90s when tech was a small slice of the US GDP and it had no international competition, but today the tech sector is the biggest engine of GDP growth in the US, so there's no way the US government is gonna throw a spanner in that just to be richeous.
In the current economic and political climate, having a monopoly on monopolistic giants like the US does, is much better than having no monopolistic giants like the EU, since nice guys do indeed finish last.
Firstly, Linux isn't made for free by hobbyists. The biggest contributors are profitable, largely American tech companies. Intel, AMD, even Microsoft is now a contributor.
Secondly, the idea that you can just replace the entire software industry with Linux is... Are there even words to describe this? Linux is just an operating system. You can't replace a whole industry with "a couple of cheap packages."
I'm not saying that you can replace the entire software industry by Linux, but you can replace Windows with Linux, you can build simple locally run software to replace many of the well-known services, you can put some efforts into creating local clones with greater adaptability to match the biggest SaaS services, etc.
Basically, to go after the easy 90%. Then we go from a world with data in the cloud, massive advertisement statistics gathering etc., to a world where people mostly use computers to solve concrete physical problems in their environment and where networks are distributed, e-mail like or like a facebook where every participant stores a substantial amount of information locally in plaintext and has it interpreted by a desktop app, where he has no feed with the content decided by others, but chooses what he has the computer show him, etc.
Just look at telecom. How much complexity in the protocols isn't there just because people have to have their resource usage monitored so they can be billed for it, and for this to be settled between telecom companies?
The software to kill SaaS and Facebook might be so simple that a couple of people could write it by themselves. It's like that local government 'if you have regional govt they decide it all in Nottingham probably in a couple of meetings. Complete amateurs.' That's where I think we could go, but with software instead of the UK civil service.
It also fits really with with the coming of LLMs etc. You can just store of a lot stuff in plain text and have this super-fast reader process it all. Instead of lots of software, just huge amounts of plaintext that the machine can understand.
Look, we know that the software to kill Facebook is indeed so simple that a couple of people could write it by themselves… because Facebook itself was written by Zuckerberg and four friends while at university.
The "software" part of this is not hard. It's everything else that is hard.
Facebook in 2025 is not at all the same software as in 2005. Nor FB the business. The market is also forever changed.
Not that this detracts from your main point. The tricky part is not the software.
The US forcing all government agencies to use open source software would save taxpayers money. Additionally — in tandem with other countries following suit — the policy would create the incentive for governments to contribute to OS development, and thus, the OS community would not need to rely so heavily on industry for Linux development, dismantling your implication that OS software is contingent on big-tech’s existence.
Switzerland already has a policy that all government agencies need to use open source software so the policy I mention isn’t a pie-in-the-sky theoretical.
The US might always dominate software (which could turn out to have no moat) and China might always dominate manufacturing.
But neither industrialized manufacturing or software even existed 200 years ago. I'm pretty sure we haven't hit the final destination in human history where there's no problems left to solve.
There's this one weird "AI" thing people are talking about. Could be something people find useful you could work on?
Germany has a big-nothing economy right now. Compared to that, even a small-software economy is useful. Germany can't live on everyone else's money indefinitely, at some point everyone else is going to get fed up that they have to be paying more tax and higher energy prices because Germany can't sustain itself.
A theoretical recovery is not an actual recovery, and if history has any lessons, then it's quite unlikely that Germany could economically recover without more US money, which is not coming.
They literally build machines that everybody needs to live. They make everything, all sorts of little of bits you need. If you need a special chemical reactor that resists some weird thing, it's probably from Germany.
Niche businesses like Zeiss Lenses can't support the economy of the EU of 450 Milion people, especially that they mostly hire highly specialize people with PhD and up.
So, you're basically that, if GDP is not up, or the companies are not doing well, it doesn't matter that they're actually building genuinely useful stuff without which all sorts of people would be in major trouble?
Germany has problems-- immigration, energy etc., and maybe some companies have problems, but the US has put huge efforts into making something even a tiny bit like the German companies that are actually building stuff, presumably because its leaders know that you can't eat software services no matter how overpriced they are-- in the end actually building things is how you get things, once you are no longer forced to get some critical vitamin through trade, and we are there now.
I'm saying that not even the nicest, rarest lenses in the world are a replacement for a viable economy.
And you can't eat lenses either, and people who do grow food also use software, and so do everyone else that makes about 90% of all the other stuff other than food that constitutes the German economy.
Germany has a viable economy. It's one of the strongest, most diverse in the world. It's in a recession right now, but we're talking about fluctuations in the 1-percent range here.
If you think Germany is anything close to a failed state then all I can tell you that you either fell for lies or intentionally spread lies yourself.
A change from 3.7% to -0.3% is not in the 1-percent range. It's a decline of more than 100%, as all the growth is gone. Their economy has been sliding for years, the only change in trend was when they were helicoptering covid cash. They are done for, they won't recover.
It's probably more of cultural difference. It's common in the US to build companies like a lot of houses are build in the US.
In the US houses are often build from wood and plaster and have a high chance of being knocked down by a storm. Companies in the US are often build on a ton of dept (and never making a profit is not considered "weird") and have a high chance of being knocked down by a storm.
In Europe people like to build houses from brick and concrete. Companies in Europe are often expected to be profitable at some point and be able to wither a storm.
US vs. EU building materials is actually locally determined - there's a lot more forest in the vast empty spaces of the US and Canada, hence all the cheap wood.
Same for oil. Same for e.g. the UK steel industry. I think people underestimate the extent to which the EU either doesn't have the same level of natural resources, or has used them up. There's a reason the last time that Germany got serious about resource independence it tried to invade Azerbaijan despite the USSR being in the way.
> If Europeans can’t figure out new valuable things to contribute to the world, than their system isn’t as clever or morally righteous or fantastic as they think it is.
Most Europeans have access to some kind of comprehensive public health offering, food that isn't killing us quite as quickly as American food does, etc. It is a system which requires thought and design that markets can't offer, since they're innately uncoordinated (the exception being oligarchies).
The idea that the market can be described as regular people deciding things is, by the way, fairly funny. We don't get to choose what gets made, and have to select from a buffet of often pretty poor options served up to us by people who are by and large not interested in anyone's wellbeing but their own.
Most of Europe recognises on some level that not everything that counts can be counted. That's the real difference. Regulation of new, high risk industries makes perfect sense from that perspective.
> The idea that the market can be described as regular people deciding things is, by the way, fairly funny. We don't get to choose what gets made, and have to select from a buffet of often pretty poor options served up to us by people who are by and large not interested in anyone's wellbeing but their own.
Is Europe more communist than I thought? You do realize if you aren't happy with the options on offer in the market, that's an opportunity for you to provide a valuable service to your fellow humans...and yes improve your own wellbeing at the same time...which is the point of a market?
Who do you think started all of the German Mittelstand companies in the first place?
That’s a bit naive. There are a lot of markets that are effectively impossible to enter without massive amounts of capital and current players are selling below cost.
The vast vast vast majority of companies do not sell a product below-cost.
And if the customers are not willing to pay more, it sounds like they're actually happy with the current offering and that's not an area that your fellow humans would find useful for you to work on.
Yes, one of the responsibilities of a founder is fundraising. If you can't sell people on investing in your vision that is...a somewhat bad sign.
> The vast vast vast majority of companies do not sell a product below-cost.
Maybe in terms of the number of companies, but in terms of percentage of market size, I'm not sure. Literally the entire social media adjacent market at the moment, including instant messaging is about offering a service below cost, killing any chance of non ad supported platforms.
> And if the customers are not willing to pay more, it sounds like they're actually happy with the current offering and that's not an area that your fellow humans would find useful for you to work on.
Not necessarily. This would be true in a world of spherical cows and rational consumers, but that's never going to be the case. There's other considerations like walled garden lock-in and network effects that consumers have no control over.
> Yes, one of the responsibilities of a founder is fundraising. If you can't sell people on investing in your vision that is...a somewhat bad sign.
So it's not about "just go out and build a competitor", but something much more complex, as reality usually is. Even access to venture capital can differ by orders of magnitude between markets.
In the short term irrationality can and does prevail in both markets and democracy. In the long term, the best product and ideas always win. This is why both democracy and markets are durable.
Paraphrased differently, this is the weak-form of the efficient market hypothesis. All decentralized processes have some level of gravitational pull toward efficiency. They're not perfectly efficient, obviously. But they trend in that direction on long time scales, unlike the alternative which is being anchored only to the whims of the fickle elite.
> In the short term irrationality can and does prevail in both markets and democracy. In the long term, the best product and ideas always win. This is why both democracy and markets are durable.
If there’s anything to learn from recent developments it is that democracy is fickle and definitely not the default state. But to me you’re still conflating commercial product success with the product being good or bad. If it was about the product, fundraising or marketing shouldn’t be among the biggest obstacles, since they have nothing to do with product quality or consumer benefits.
> And if the customers are not willing to pay more, it sounds like they're actually happy with the current offering and that's not an area that your fellow humans would find useful for you to work on.
People would need to have perfect information about all the products they buy in order to truly know if they're happy with them. If they knew and saw first hand all the effects that a product has (poor working conditions, poor pay, environmental destruction, effects on health, etc) they might not actually be happy with these products. It's impossible to research all of these things on everything you buy, and therefore the market does not "care" about any of these things, only about the immediate effects that the buyer can feel.
If people would actually be happier with your solution that's simply a marketing problem, which is entirely solvable.
But I think more often people delude themselves into thinking their thing is better (since it's their baby) when it actually is not, which no amount of marketing dollars can solve.
It's not just a marketing problem, because the amount of information you'd have to have in order to make a truly rational decision is beyond any simple marketing campaign. Your competitors would also be creating campaigns against yours, so how would a consumer be able to figure out the truth without impossible amounts of work?
I'm sorry but your view on the economy and society is really naive. As if everything could be solved by markets. Monopolies don't exist. Powers other than supply and demand (political, societal, geological, etc) don't matter. It's not that simple. Read some books of (old) economists or philosophers
If you cannot argue your points succinctly here without ad hominem attacks, I presume they aren't strong enough to stand on their own.
A rebuttal of "markets don't work because monopolies might form!" doesn't make sense when the alternative is to make everything a monopoly in the form of top-down government control.
Even the Chinese Communist Party understands that markets are the best way to create value and growth.
> The vast vast vast majority of companies do not sell a product below-cost.
Tha tis true, as they won't survive.
However an established company often has the ability to go on a price war, including selling under cost temporarily, to fight off an up starting competitor and preventing it from entering the market in any serious way. Once they give up, one can go back to higher prices.
Thus only one who can compete is somebody who can use profits from other area, thus some already well established player in a related market.
The problem with many digital offerings nowadays, in particular those that dominate the end user market, is that the user isn’t the customer, but is the product (i.e., directly, or indirectly, ads). Another problem is oligopolies, like Android vs. iOS.
> If Europeans can’t figure out new valuable areas where they can contribute to the world, than their system isn’t as clever or morally righteous or fantastic as they think it is.
I don't think it follows that unprofitable things are by definition not clever, righteous, or fantastic. This seems like a blinkered, American-capitalist viewpoint.
Profitable and valuable are synonymous. If something is more valuable than the inputs used to make it, then it is profitable to make it.
Things being clever, or righteous, or "fantastic" (whatever that means) doesn't mean that people actually value them. That isn't what value means. Something is more valuable if you would give up more to have it. It is less valuable if you would give up less to have it.
Basically, no, it is in fact definitionally true, not blinkered, and has nothing to do with America. All of Europe is just as capitalist as America, Britain, Australia, New Zealand, etc.
Except you do not provide it for free. You provide it under the implicit transaction of your relationship, where you are both giving up value in other to get value.
Try betraying your partners trust and cheating on them - or refuse to take care of your children. They will likely be upset that you aren't holding up your end of the bargain.
Just because you haven't placed a price tag on your relationship and hate the idea of thinking of it that way due to modern cultural ideas of romantic love, doesn't mean relationships are not a transaction (historically in fact they did carry a price tag).
So your police, firefighters, the military, health services (not in the US though) and various charities are not valuable? That is an interesting take.
They are valuable and they are also quite profitable (I am excluding "various charities" as that is too broad and fuzzy).
The fact that the state may provide the majority of these does not mean that they are not profitable as private ventures. Why are they profitable? Because they are deemed very valuable!
In some countries they are not profitable, because they are publicly owned organisations not for-profit private ones, and they are run purely for the benefit they provide to society.
Please re-read the comment you replied to with this context in mind (as their excluding the US was for this reason; though of course the US is not the only country foolish enough to allow profit motives to harm their healthcare, firefighting, etc. services) - the fact that some countries choose to allow profit extraction through these services does not mean that the non-profit versions have no value.
Healthcare is a profitable industry in the EU. Security services are a profitable industry in the EU. There are private firefighting services in the EU. You can easily understand that in general terms all of these services are valuable and profitable to provide (because they are valuable!). The same goes for "military services"... Mercenaries and other "private providers" are a thing.
You are completely missing the point. Whether a type of service has a state monopoly and thus no viable private market is also quite irrelevant to the general point.
The general point is that people (i.e. "the market") are willing to pay for things they find valuable but not for things that they do not. That includes paying through taxes though because the payment is indirect it is more likely to not perfectly align with "value".
I personally think it's you missing the point, though I suppose if I were missing the point I might not realise it!
The fact that some healthcare in some EU countries involves profit is irrelevant to my point & the point of the original comment you replied to. Neither of us were saying that the EU is a shining example of profit being out of healthcare (and in fact I was clear to state that the US is not a solo example on that side of things).
The claim we are disagreeing with is that profit = value and therefore lack of profit = lack of value.
Take UK firefighting services as an example. They are publicly owned and funded by taxes, and as such they are not designed to extract profit, just to be funded enough to provide the services needed. Does this mean they have no value? And in a hypothetical world where every country decided to shut down all private fire fighting companies and to fund publicly-owned ones, would that mean there is no value in any firefighting worldwide?
In my experience, people who argue against this model and in favour of for-profit businesses providing these services say that the profit motive leads to better efficiency, competition etc. (which I personally agree with, but that's a separate conversation). I don't think I've ever before seen anyone argue that lack of profit means they have no value.
There are profits made in the UK firefighting services. The fact they are (mostly?) funded by taxes is not key.
People are willing to pay for those services (and they do through their taxes as a result). People are paid salaries to provide those services (that's a basic form of profit). There are many commercial companies that provide equipments and even services to tax-funded firefighting services. So there is indeed "profit" everywhere. That is the big picture.
> I don't think I've ever before seen anyone argue that lack of profit means they have no value.
That's odd because it is a really basic concept.
In general socialised services (education, healthcare, firegighting, etc) are so not because they aren't valuable or profitable but because we think that they are so important that everyone should have access to them, even those who can't afford them.
Europe is dying. It is an old socialist relic, with a completely outdated model of reality. The successes of the extreme left and right shows that the political nobility are done.
Sadly europe never realized that low taxes, capitalism and liberty is what drives wealth.
I wonder if, in a generation, when the best brains moved to the US, asia and argentina, the continent will finally awake from its socialist slumber?
Hong Kong managed to go from a peasant village to a global financial center in a generation or two. In theory, it should be possible for europe to do the same. But in order for that to happen, there needs to be insight into the sickness, and awareness of the cure.
I'm happy I left. After I left high tax western europe I basically doubled my salary after tax! =)
Spain is flooded with Argentinians fleeing. Spain, which isn't even that good. Europe is still a much better place to live to the common people than anywhere else in the world.
If you look for one, you can always find a worse place to live on the planet than your own, if you wanna make yourself feel better about where you live, however that's no excuse to be complacent and ignore the real issues your own place is facing. That's called coping.
I want my country every year to be just a little better than it was the year before. If that's not happening and I need to resort to comparisons to failed developing countries to see it in a good light, then something is going wrong with it.
Also HK and Singapore are intermediary port cities that made those general shifts by adopting policies inspired by Europe, in the former case whilst still being the territory of a European power...
> Sadly europe never realized that low taxes, capitalism and liberty is what drives wealth.
Honestly we have moved Europe so far past the post-political that I find it difficult to comprehend peoples politics nowadays. I wonder what people think "socialism" or "left" politics is now that everything has been so thoroughly depoliticized, I genuinely don't know. Is the EU "left"? I guess so? Is the IMF?
You can just look at the numbers. Percentage of GDP that is driven by government spending:
China: 33%
USA: 34%
Germany: 50%
Economically, modern Europe is more communist and exerts more centralized control than China. Might explain why the current class of European elites have presided over the greatest destruction of an industrial base since the Soviet Union.
By the Overton window of America, I think much of Western Europe is somewhere between "extreme left wing" and blank stares of non-comprehension at the still-present literal Soviet memorials that were never removed when the literal USSR fell.
By the Overton window of Europe, I think the Democrats are "dangerously right wing, look at them being pro-gun". Certainly they are to the right of my personal Overton window, though perhaps I am projecting my own views on my fellow Europeans.
Republicans of faint heart should avoid finding out how Trump gets labelled on newspaper front pages around here.
These do not scale to 30% of GDP in the same way high value B2B industrial equipment does (in manufacturing you happily pay $100,000 for a piece of machinery because it can turn inputs into more valuable outputs at scale).
Instead of coming up with incorrect ideas about what the government should “encourage” from the top down, what if European elites focused on cooperating more with their neighbors to open more opportunities and meanwhile let the peasants (the market) figure out the most productive and profitable uses of their time.
If Europeans can’t figure out new valuable areas where they can contribute to the world, than their system isn’t as clever or morally righteous or fantastic as they think it is. I believe if allowed the opportunity, the people would find this positive-sum value to be created. Who do you think founded all the Mittelstand in the first place?