I think Pat is missing the point here. It's not that German companies are 'risk-averse' but that it does seem virtually verboten for individuals to hazard something and risk failure to create something new.

Not quite unique - there are a few examples of Germans startups which have made it - Software AG for one. But even there it seems fairly common for german companies to rebase themselves to Silicon Valley (the engineers stay in Germany but headquarters moves) - in order to be closer to customers, capital, and news networks.

This wasn't always so - post WWII there seem to have been tons of startups in Germany - to the point where Germany was probably more entrepenerial that the US in the 50's and 60's. Volkswagen being a prime example. It was founded by Porsche in the 30's but in 1948 there was virtually nothing in Wolfsburg. But it grew.....

I wonder whether the 24 days to form a company isn't just the tip of the iceberg, Pat? In the US or UK I can form a company in a couple days (go to a website, fill out a form, and wait for the paperwork in the mail. But the company is a legal entity virtually from the moment the payment goes through.

Not that the difference between 1 hour and 24 days is critical - but it may be a symptom of a more general malady.

Getting premises, hiring workers, doing all the health and safety regulation and payroll stuff. I wonder whether the paperwork & regulation isn't drowning new companies.

I also wonder whether the age and training of German students isn't contributing as well? A lot of companies are started by people in their 20's. The average German graduates from university at what - age 30? Age 30 and no experience while his counterpart in San Jose may have 6 years of experience in two startups by then!

What is German bankruptcy law like? Do ddebts stay with you forever? Perhaps employers do a credit check on applicants. In the US an employer may well see participation or heading a failed startup as a great asset - do German employers disrate such 'failures'?

It's not only Germany which has problems creating the 'start-up' mentality. I've seen it here in the UK.

To create the true mentality one's 'critical workers' have to have a real substantial stake in the company. The potential gains must be enough to allow the worker a substantial chance of becoming rich or at least prosperous as a result of the company's success.

I worked at a management consultantcy where they implemented an 'ownership' scheme. Unfortunately the plan was so paltry that the potential reward for valueable professionals amounted to no more than 15% of yearly salary. That is enough to purchase a nice holiday but not enough for a house.

My rule of thumb is that a 'big win' must be possible for the professional staff of such a company. I define a 'big win' as roughly the price of a small house in a middling neighborhood in the area where the company is located.

I'm not sure most European managers grasp that point yet. They understand the concept of 'big win' very well - where it concerns themselves. But they do not seem to realize that their workers are not fools - they will not work their hearts out to make the management rich when they are to be fobbed off with the price of a used car or a fancy holiday as a reward - it's not enough.

I am working for a startup in the UK which is run by a Silicon Valley type - and the share options ARE enough - or almost enough. I could always do with more..... ;)

I have worked out what proportion of the shares I own are of the entire company - and what a potential sale or float price might be for the company, and the proceeds could be enough to purchase a small house in my area. The company has about a 30-40% chance of this kind of success I think, but even a lesser success might bring enough for a nice car or down payment on a house. Maybe a 5% chance of a major success (2 houses or more), and 10-20% chance of utter failure.

That is enough to cause me to bust my butt. Indeed, I have been.....

"One in six employees in West Germany already participates in the profit of his company or owns part of the company's capital."

I think the degree of participation is as important as the gross numbers. Percentages can be misleading - the management consultantcy I mentioned earlier would surely have counted as 'employee ownership' but the share options offered were too small to matter much. I think the average professional employee got about £2000 worth - 3 to 5% of their annual salary. Even had the company prospered the shares would not have gone to much more than £5000 - enough for a raggedy used car. The partners made out like bandits - and the line employees knew it.

A true startup offers much more in the way of share options, and usually the annual salary is lower. That is the case where I am - I am probably £3-4,000 below market on salary. But the share options are a large enough stake in the company to allow me to own an aparment or house outright in this area - if the company succeeds. We should know for certain in another year or so, I think.

Seems to me that three posts by guestblogger Ed Philip last year on the German Joys blog might offer some insight to lack of German dynamism and risk-taking.

Philip describes his assembly of the perfect employment CV - 40 pages worth of documentation about every facet of his work life since childhood!

http://andrewhammel.typepad.com/german_joys/2006/10/getting_hired_i.html

http://andrewhammel.typepad.com/german_joys/2006/10/getting_hired_i_1.html

http://andrewhammel.typepad.com/german_joys/2006/10/getting_hired_i_2.html

The risks of a spotty work history seem much, much higher in Germany than in the US or the UK. That may contribute to German reluctance to take risks. In the US taking a flyer on starting a company or joining a startup are relatively low.


In my field it is rare for an employer to take much (if any interest) in anything occurring more than 5 years ago; I am tempted to write 2 or 3 years ago.

Well.... let me qualify that. My general level of experience and the fact that I've done lots and lots of weird & diverse things in the software engineering field ARE critically important - and a large asset. Certain employers look at my CV and see someone who has solved the weird, the bad, and the crazy. But they are unconcerned with a 3 month gap in my employment in 1985 - or even a 9 month gap in 2005!

According to Philip that is not the case in Germany. I might venture to say that employers in the US are looking for talent but in Germany they are looking for perfection. In many ways talent and perfection are opposites in the work world. In startups it is talent which counts - not perfection......

"The lack of German entrepeneurship is a recent phenonema so I would blame the welfare state. The safety net is a disincentive to perform."

I'm not so certain that is completely correct, Reid. The heyday of Silicon Valley was in an era when the safety net in the US was more comprehensive than it is now. And how many welfare recipients are potential entrepeneurs? Not many. How many entrepeneurs are likely to go on the dole? Not many? It's simply not an attractive choice - no matter how generous the dole is.

In the longer term - perhaps. Two keys to the choices a person makes in life are role models and early jobs. A kid with almost no workers in their circle starts out well behind everyone else. But that is not necessarily the fault of the welfare state as much as how the welfare state is designed.

A welfare state which supports work may work better than one which supports (or even enforces) idleness.

"Actually, "socialist" Sweden is an example of a country that has transformed itself into a highly innovative knowledge-based economy."

How deep does the innovation go? Well- how deep does it goo in the US. So Ok I'll buy at least part of your argument.

As I argued above with Reid I'm not sure I see an compelling argument for the idea that innovstion and the welfare state are opposed.

I do see a link between work and innovation - but work conditions and national customs have if anything a stronger corelation.

Most reports that I have of the traditional Swedish welfare state is that it is designed to support work and keeping or returning people to work - rather than just issuing checks and lrtting them rot. Such a system can actually reduce the consequences of taking a few risks - and thus raise people's willingness to take them.

In Germany the current system may be designed to punish failure or (really) any kind of flakiness at all, including the weird notion that one could be the next Steve Jobs.

My advice to the Germns is to unbutton the (white) collar a bit and hang loose. When evaluating a candidate look at what they can do rather than what they can't. Value degrees from 'The University of Hard Knocks' more highly relative to more formal qualifications. And value entrepeneurs more.