15 ms·

re: the crisis of the Mittelstand in competing VS China, I'm reminded of this tweet. It's a fictitious illustrative case not a serious study but I think it desc

by lz400 1mo ago

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

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

by lz400 1mo ago

Incipient 1mo ago

I don't think the fundamental premise is much of an issue - it's what a (mostly) free market is meant to do. Someone sells a chair for $100, someone else believes they can sell it for $80, so they do. There are two main complicating factors (outside of brand reputation and possibly some others?) 1) quality - someone accepts the $80 chair which is a little bit more wonky 2) the $100 company spent a few years developing the technology to steam and bend timber to make the chair so they're marking up based on R&D and ip. The $80 chair company just copied the other tech There is absolutely a lot of profiteering (charge what we can, not what we need to) happening, but honestly I believe that happens everywhere, including China (trivial case - wild price swings on aliexpress - they're maximising profits).

bluefirebrand 1mo ago
> There is absolutely a lot of profiteering (charge what we can, not what we need to) happening I think that profiteering is the default behavior for companies. Maybe not all companies behave this way, or maybe in the past it wasn't the default behavior, but I'm very confident it is now
gmerc 1mo ago
In the digital world quality is a post purchase signal and the ability for consumers to communicate about quality has basically been destroyed by allowing paid counterparts by businesses to drown out the signal
lz400 1mo ago
Agreed, it's that the free market _allows_ you to do. What's concerning is that we're used to the "semi-benevolent" image of the free market where a company succeeds and then returns value to stock holders, and the employees and the investors and the country all share of the riches. Of course the executives and main shareholders get outsized returns, inequality might raise, but many people see a bit, and capitalism works, kind of. This new Chinese "involutioned" capitalism is much more scary and robotic. The companies never really make money, becoming just an operation that maintains itself on minimum wage workers, all to the service of reducing prices. Shareholders don't make money, employees are semi-poor, nobody sees any returns. But the customers see cheaper prices! you say. Sure, yes, the products get cheaper, but now think of yourself as an employee not a customer. Imagine the involutioned companies triumph. Your previous company, where you had a good salary goes bust. You find a job in an involutioned company where everyone is almost poor and worked to death just to reduce prices. Your portfolio goes to shit because companies don't make money anymore.... Sure, everything's cheaper now but I'm not sure that makes it better.
- pingou 1mo ago
  But if everything is cheaper, isn't it exactly the same as if everybody is richer? Except that it could incentive people to put their money into rent seeking businesses and increase the real estate prices for example.
- luke5441 1mo ago
  You forgot the last part about now no one having money anymore to buy the companies products, so you go into a deflationary spiral. To solve that you'd want to increase wages by e.g. improving workers rights, giving them mandatory pensions etc. But that is scary: They might get too much power and revolt! This works for China currently for a while, because they are exporting more and more. They have realized that they need to grow internal consumption, but are not managing to grow that sufficiently.
decimalenough 1mo ago
The original Aalto stool, consisting of three pieces of bent wood and a circle, costs $479: https://www.finnishdesignshop.com/en-au/product/aalto-stool-60-birch https://www.finnishdesignshop.com/en-au/product/aalto-stool-... The IKEA copy, identical except that the circle is more of a triangle, costs $19: https://www.ikea.com/us/en/p/kyrre-stool-birch-60416925/ https://www.ikea.com/us/en/p/kyrre-stool-birch-60416925/ Both companies are very profitable, but I'm sure IKEA shifts a lot more units. And the Aalto stool is solid wood and will last forever, while the IKEA copy is probably laminated cardboard or something.
- summa_tech 1mo ago
  Laminated wood veneer for legs, plywood for seat. Not as disposable as the eternal LACK, but also not bent wood.
- esafak 1mo ago
  This is a great demonstration in the value of approximation. The IKEA is close enough for most people's tastes at a much more attractive price point.

avhception 1mo ago

I guess it depends on where you would draw the line with respect to what still constitutes "Mittelstand", but in the small-town circles where my family operated our company, outsourcing wasn't really a thing. Most of the companies were around 30 to 3000 employees, and mostly operated B2B for the automotive industry. There was exactly one company which got overly ambitious and started to emit shares. It was a big deal back in the 90s, SHARES! From our hometown! Like, you could watch it in the Ticker in the evening news if you waited long enough! But they quickly faltered when the golden 90s turned into the permanent state of crisis beginning in the 2000s. Most of the others were still family-owned, including our own (electroplating, ~130 employees), and stuck it out much longer. But we've since had to close doors, too, as have most of the others. It's a combination of things. Regulations have you in a chokehold, you can't get decent employees, and every process input from energy to equipment to real estate related costs and whatnot just cost an arm and a leg and slowly bleed you dry. Nobody here ever flew business class (except maybe these flashy idiots with their shares). The families always re-invested.

clarionbell 1mo ago
This seriously needs to be repeated again and again. It's not that Mittelstand got greedy. Neither did most other small and medium companies in Europe and US. They gradually became less competitive by overregulation, high input costs, and complete lack of state support. The last sometimes bordering on hostility.
- RandomLensman 1mo ago
  There has been at least indirect state support for some by support for the automotive industry. They might have gotten squeezed as a supplier but the ecosystem got help to keep moving.
- avhception 1mo ago
  Anecdote time re: Over-regulation: We had a side-hustle, automatic sorting machines. Mostly nuts and bolts, but other stuff, too. About 10 employees. By some miracle, it managed to survive the loss of it's biggest customer (the aforementioned electroplating company). But we had to move shop. After we got a place, the city terminated the operating permit for the building. Why? Because, you see, the company that operated the building before had it filed as "metal working", so that is what the permit said. But _sorting_ metal doesn't alter it, so the permit doesn't hold! And they wouldn't issue a new one. Fun times.

crote 1mo ago

This is why the West is getting its ass kicked in non-legacy industries. Our MBAs have internalized the idea that you "win at capitalism" by buying out your competitors, making products shitty and expensive, and making shareholders filthy rich. Their MBAs believe that it means selling the best product possible at razor-thin margins, killing your competitors by being the better choice. Everyone is always complaining about Chinese companies "stealing IP", "getting state subsidies", and "dumping products". No, they are just being better at capitalism! We bootstrapped their industry with outsourcing, and then killed our own subsidy system by retooling it to give free money to large shareholders. No wonder our companies aren't able to compete - we reward incompetence...

izacus 1mo ago
Somehow MBAs, our champions of capitalism, completely forgot that capitalism only really works for society when free market competition takes place. This is what's attractive about the "Mittlestand" - having a wide variety of companies competing in the same market so they push each other to improve services. 21st century consolidation is a direct opposite of that.
- vrganj 1mo ago
  But consolidation is the inherent end game of capitalism. It's almost as if it was full of contradictions that will always result in crises and a bad way to organize a society...
  - pantalaimon 1mo ago
    > It's almost as if it was full of contradictions that will always result in crises and a bad way to organize a society... We yet haven't found a better way
  - ahartmetz 1mo ago
    Some of these contradictions can be fixed well enough by government intervention to make capitalism the best known system. It used to work pretty well for several decades.