
Why Germany Dominates the U.S. in Innovation - r0h1n
http://blogs.hbr.org/2014/05/why-germany-dominates-the-u-s-in-innovation/
======
netcan
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.

~~~
danielweber
And it repeats this trope about the US manufacturing industry being
"decimated." The US is manufacturing more stuff than ever before.

His evidence is that US manufacturing is only 13% of GDP, where it is 21% of
GDP in Germany.

Well, percent-of-GDP is, by definition, a zero-sum game. There are only 100
percentage points to go around. What other industry has been "decimated" in
Germany by those 8 percentage points going into manufacturing?

This is HBR's "blog network." Can any Harvard Business student make an
equivalent entry, or is there some kind of editorial control here?

~~~
darkmighty
You're picking a strange point. Relative decline, in %GDP, _does_ mean a
decline in importance in manufacturing. It's well known that US manufacturing
is down for the last few decades and Germany is indeed an outlier among
western countries in that manufacturing has retained relative economical
importance.

~~~
michael_h

      It's well known that US manufacturing is down
    

manufacturing _employment_ is down.

------
fjk
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
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
> 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
> _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.

------
josefresco
"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.

~~~
drzaiusapelord
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.

~~~
netcan
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?

~~~
drzaiusapelord
Honestly, this just sounds like idealizing the past to me. In reality, factory
work was demoralizing and even losing a small customer meant instant layoffs.
The idea that things are worse today is fairly ridiculous and tends to reflect
people with a certain political axe to grind.

------
adventured
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-
Manufactu...](http://www.nam.org/Statistics-And-Data/Facts-About-
Manufacturing/Landing.aspx)

~~~
300bps
_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

------
mschuster91
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.

~~~
x3ro
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.

~~~
dragontamer
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.

~~~
brazzy
Another somewhat different case in point: Bloomberg L.P., started with a $10m
personal investment, took no more than 30% outside investment (which was
eventually bought back) and grew to a $8b business over the course of 30
years. "lifestyle business", really?

~~~
apaprocki
~$8b yearly revenue -- the business would be worth substantially more. 30
years is a long time, though. I'm curious now to find out how many years in it
took to have a $1b valuation.

------
progx
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.

~~~
this_user
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
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
Exactly. A lot of critical software gets written for industrial automation,
and you never have a chance of seeing it on GitHub.

------
mastazi
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.

------
sfbsfbsfb
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.

------
bluetomcat
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
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
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.

------
lispm
This chart may explain what the author thinks of:

[http://www.finfacts.ie/irishfinancenews/article_1025980.shtm...](http://www.finfacts.ie/irishfinancenews/article_1025980.shtml)

See the number of 'hidden champions' in Germany, a country with 1/4 the US
population.

~~~
morgante
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
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_...](http://www.newyorker.com/reporting/2008/09/15/080915fa_fact_bilger)

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-...](http://www.tunneltalk.com/East-Side-Access-Mar11-Queens-TBM-
Launch.php)

I find this pretty exciting.

------
morgante
> 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)_...](http://en.wikipedia.org/wiki/List_of_countries_by_GDP_\(PPP\)_per_capita)
2:
[http://www.marxists.org/reference/subject/economics/keynes/1...](http://www.marxists.org/reference/subject/economics/keynes/1930/our-
grandchildren.htm)

------
danvoell
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.

------
spindritf
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.

~~~
radva42
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...](http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2013-14.pdf)

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?

~~~
rco8786
What does the cost of education have anything to do with here?

> What I paid in Germany was around $300 per semester

> In the case of my university the government spent like 2.5$ billion to
> extend the existing high-tech cluster

> The only thing I am not fond about Germany right now is the high taxes

Ever think those might be related?

> I don't know... is it easy to find a part time job in your field of studies
> in the US?

In the U.S., like the rest of the world, this is entirely dependent on what
your field of study is.

~~~
radva42
> What does the cost of education have anything to do with here? The
> accessibility to higher education has everything to do with the capacity of
> the nation to innovate. And the cost is one of the main factors - it's one
> thing to have to pay like 500-600$ per year, another - thousands or tens of
> thousands.

> Ever think those might be related? I never said that. But there are a lot of
> different possible scenarios here, where to put the higher tax burden - on
> the companies or on the employees. Check for example Denmark and Sweden as
> they follow different paths in that matter.

~~~
rco8786
> The accessibility to higher education has everything to do with the capacity
> of the nation to innovate

The US has a higher % of people with higher education degrees than Germany. If
anything, your argument needs to be that crippling student debt inhibits the
capacity of a nation to innovate.

------
tsotha
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).

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

------
Eye_of_Mordor
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.

------
squozzer
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.

------
calibraxis
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?)

------
guard-of-terra
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.

------
jey
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.

------
drcode
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.)

------
alexvr
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
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
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
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.

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

~~~
arethuza
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....](http://www.bmw.co.uk/en_GB/new-
vehicles/bmw-i/i3/2013/start.html)

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
Does the Tesla not pre-date the I3?

~~~
Zigurd
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
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
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_ent...](http://www.bmwgroup.com/e/0_0_www_bmwgroup_com/forschung_entwicklung/mobilitaet_der_zukunft/project_i/project_i.html)

~~~
marknutter
The Tesla Roadster was officially revealed to the public on July 19, 2006, a
full year before BMW started their "i Project". Hmm, I wonder what inspired
them...

------
Im_Talking
Because Germans are not as religious as Americans.

~~~
bayesianhorse
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
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.

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

