A recent article in Politico, “Rust belt on the Rhine”, lays out many of the monumental challenges the German economy and society face in the future:

Declining traditional industries, mostly centered around automotive.
No major players in new tech sectors.
A byzantine bureaucracy.
A finance sector that is a shadow of its former self.
Critical infrastructure showing its age (quite apparent, for example, in the railroad system).
A rapidly aging population.
Skyrocketing energy prices, in large part due to botched energy policies over the past 20 years (including overreliance on Russian imports and a nuclear phase-out).
Major corporations investing in innovation elsewhere, due to various combinations of the above.

The article does not mention the educational system, which in many ways appears to be stuck in the 1950s (minus corporal punishment). But the educational system might be an important root cause of some of the above challenges. For example, the burgeoning bureaucracy, more on this below.

Related to all of this, another article, also in Politico, describes how the European Commission is complicit in cementing the status quo. As the article says, “When it comes to technology, the countries making the rules aren’t those leading the field.”

None of this looks good.

But is it all forced upon us by politicians, lobbyists, and managers?

Perhaps things are more complex than that, and more uncomfortable. I’d argue that there are factors at play here that are the aggregate of individual decisions.

Bureaucracy as a business model

The complexity and growth of German (and EU) bureaucracy affects all aspects of life. For example, people building, buying, or modernizing a home find themselves interacting with – and making payments to – government offices that they didn’t even know existed (no, not the intelligence branch).

This burgeoning bureaucracy has spawned a massive industry of consultants and (tax) advisors. For example, the number of tax consulting companies in Germany has been strictly increasing since 1962 – independent of economic cycles.

These market actors have a vested interest in keeping the system complex, unpredictable and vague because this contributes to their business growth. The combination of lawmakers (often former advisors or consultants themselves) and the advisory industry has become a self-perpetuating system.

Working in these industries is an attractive proposition to many. High job security combined with high salaries – and a way of working that is very similar to how you were taught and what you learned in school. In fact, one could get the impression that one of the main goals of the school system is to breed the next generation of bureaucrats, consultants and auditors.

But in the end, none of these industries employ a conscription model. It is up to every individual whether they want to join or not.

Science and technology have an image problem

The image problem of science and technology comes at different levels of severity. There is the “hardcore antiscience movement” – a global phenomenon that is relatively small in numbers but extremely vocal and violent .

But then there are “milder” variants of this. It is often cool to be “bad at Math”. This manifests itself in declining numbers of STEM students. Importantly, this is true not only in absolute terms but also relative to other subjects . Additionally, many university degree programs that combine STEM and business seem to shift heavily toward the business side of things. But to put it simply, when you start a technology company, there is not much need for business administration because there is no business to administer yet.

Again, similar to the “bureaucracy as a business model” above, these decisions are not forced upon anyone. And interestingly, with children, science and technology do not seem to have an image problem. To the contrary, as evidenced by the wildly successful children’s TV show “Die Sendung mit der Maus” . The show has been around for decades, demonstrating that it is possible to explain complex topics to children. But then, somewhere on the way to adulthood, many people seem to lose this curiosity.

The status quo is very comfortable for many

More and more, wealth in Germany is inherited, not created. In 2020, Inherited wealth was EUR 50.2 Billion in 2020, compared to EUR 24.7 Billion in 2010. Add to that the very substantial benefits in many corporate jobs, particularly those closer to the administrative side of the business. Plus the very strong protection against dismissal.

All of these factors combined result in risk-averse behavior. For example, since the early 2000s, the number of start-ups has decreased by 50%, relative to the population size .

And importantly, all of this increases the gap between the haves and the have-nots. It is becoming increasingly difficult if not impossible for children from immigrant backgrounds, single parent families, or less-well-off families to succeed.

And yet she is moving

As an entrepreneur myself, I am biased, of course. But I think that entrepreneurship is central if we want to get out of this quagmire. Will entrepreneurship get rid of bureaucracy, etc.? Probably not. But without entrepreneurship, less bureaucracy etc. won’t matter either.

To illustrate, I selected four examples of entrepreneurship that I find inspiring. Notice that “entrepreneurship” here does not necessarily mean “starting a company”. I intentionally picked four very different examples. For each example, I add my personal “lessons learned”.

BioNTech

Were it not for Ugur Sahin and Özlem Türeci, the founders of BioNTech, the world after Covid would likely have looked very different, and not in a good way. Originally the focus of BioNTech was on developing mRNA-based cancer treatments. But after reading about how Covid was spreading in China, Sahin and Türeci rapidly shifted focus, teamed up with Pfizer (specifically with Albert Bourla, CEO of Pfizer), and developed one of the most successful Covid vaccines.

Lessons learned: Technical CEOs have the upper hand, particularly when fundamental decisions about a company have to be made (see link).

LAION

Christoph Schuhmann is a physics and computer science teacher at a high school in Hamburg. In his spare time he builds LAION , the Large-scale Artificial Intelligence Open Network. LAION builds large-scale machine learning models and datasets. For example, its LAION 5B dataset contains 5 billion images, and it is crucial to the development of generative AI tools like Stable Diffusion, Imagen, and Midjourney

Currently, LAION has a global team of 15 people (https://laion.ai/team/).

Lessons learned: You can go a long way with conviction and a small, globally distributed network of good people.

Environmentally friendly long-term energy storage

One of the most-discussed issues with wind and solar energy is the “dark doldrums”: When you use wind and solar energy, how do you bridge the times when there is not enough wind or sunshine? Solving this requires new kinds of energy storage technologies.

In principle, redox flow batteries are one such technology. Mariella Benkenstein and Marit Kock have developed a new kind of redox flow battery that uses carbon dioxide and water as electrolytes, rather than vanadium, which is environmentally harmful

The two do not work at a large corporation or a research institute. Rather, they started their project while they were high school students. Now, their work is being funded by SPRIND, the Federal Agency for Disruptive Innovation.

Lessons learned: Let students do great work. Don’t waste their talents by having them make coffee as interns.

The Munich police on Twitter

In the evening of 22 July 2016, a mass shooting in Munich killed 10 and injured 36. Shortly after the shooting began, false information was rampant, including false reports about terror clusters spread throughout the city. And the official warning app developed under government auspices, Katwarn , crashed minutes after the attack under the heavy load of requests. It remained unusable for the rest of that night.

What worked, however, was Twitter. And the press officer of the Munich police at the time, Marcus da Gloria Martins, started tweeting; correcting false information, giving practical advice, and sending out facts as soon as they became available. Taking into account the “linguistic composition” of the Munich population, he and his team tweeted in German, English, French, and Turkish.

Now, as of July 2023, the Twitter account of the Munich police has almost 496,000 followers. For comparison, Munich has a bit under 1.5 million residents.Lessons learned: You think your organization is too rigid and you can’t do anything about it anyways? Think again. If an organization that is – for very good reasons – as rigid as the police, and they can do this, so can you.

Concluding Comment

I hope the context and commentary provided here is of use both for your awareness of the complex dynamics underway in Germany today but also of use as we all struggle with ways to accelerate innovation in the face of both economic and bureaucratic headwinds. I look forward to discussing this at our next OODA network meeting. Till then reach out with any questions or comments.