(#89) 🇩🇪 on Germany: economics, energy and industry
Lidl is in the cloud computing business
Knowledge Partner: ENGIE Romania
Te provocăm să răspunzi la aceste 4 întrebări:
1. Este consumul anual de energie electrică al companiei tale peste 500 MWh?
2. Lucrezi în domenii precum producție, retail, banking, tehnologie, telecomunicații sau centre de date?
3. Are compania ta ca obiectiv sustenabilitatea?
4. Îți dorești o predictibilitate mai mare a costurilor cu energia electrică pe termen lung?
Dacă ai răspuns afirmativ la toate aceste întrebări, compania ta ar putea beneficia de achiziția de energie electrică printr-un contract de tip PPA.
Obţine rapid consultanță personalizată, gratuită de la experţii ENGIE.
Strategy
🇩🇪 on Germany
It all culminated with this graph from Bloomberg showing that Germany’s economy is now overtaken by…California.
…but in the past, I said other things, for example:
1/ From onStrategy Newsletter #28:
From The Wall Street Journal: “Germany Is Dragging Down Europe’s Economy”.
Indeed, here are my comments:
“Manufacturing accounted for 19% of Germany’s gross domestic product in 2021, roughly twice as much as in the U.S., the U.K., or France, according to the Organization for Economic Cooperation and Development” - high energy prices make a large quantity of the products expensive, hence uncompetitive. Now you can understand why Europe never had a common energy policy and why disconnecting from cheap Russian gas is the end for many businesses in the EU (including for those producing parts for the German companies)
Germany is totally unprepared for the skillset of the future: software. Why? Because software ate the world. LINK
Germany’s economy is unique in the sense that is developed to export, making it fragile to any global trends. The internal market will never compensate for the eventual disruptions globally. (ie. including the EU market)
2/ From onStrategy Newsletter #62:
de-industrialization
No energy, no money. Germany’s days as an Industrial Superpower are coming to an end
It is inconceivable to me what happens in Germany on the energy topic. The country prefers to burn coal than to operate the nuclear plants it has remained.
In the meantime, physics Nobel Laureate and former U.S. Energy Minister Steven Chu (under Obama) accuses German Greens of broadcasting "many half-truths" sabotaging German manufacturing and harming the climate by rejecting nuclear in favor of gas.
The challenges facing Germany's manufacturing sector extend beyond energy issues. The country is also grappling with significantly heightened competition from China, a reduction in demand from Chinese markets, and enduring difficulties attributed to its inadequate education system.
3/ From Newsletter #68
“Germany should get serious about productivity growth
In recent years, the rate of productivity growth in Germany has decreased by half. According to a study conducted by the McKinsey Global Institute, productivity growth in Germany stood at 1.6% from 1997 to 2007 but fell to 0.8% from 2012 to 2019. This downturn is attributed to persistently low net investment compared to international standards. Investment in Germany fell to less than 2% of GDP not just following the global financial crisis but also after the dot-com bubble burst, and it has failed to show significant recovery despite a surge in employment growth.
Additionally, Germany has not seen as much benefit from the robust productivity gains observed in the services and retail sectors. Moreover, the rapidly expanding information and communication technology (ICT) sector is relatively small in Germany compared to other countries.”
Also, in my takes I have mentioned more about what’s wrong with the country’s future:
Being the largest country in EU means also being totally interconnected with other countries. If Germany goes then it will be together with Austria, Hungary, Slovakia, and maybe the Netherlands. Those who will be somehow fine: Poland, Romania, and Turkey.
Destroying its CO2-free nuclear plant, like the one from Grafenrheinfeld, so that it can spend billions on new gas power plants. LINK
Freeze or total lack of interest in its army, although its generals trigger the alarm for a potential war with Russia in the next years
Continue investment in China, although everyone else is derisking. LINK
The working population getting old very fast (in the top 5 globally)
Bureaucracy and NYMBISM.
This leads me to where we are today:
Becoming the “sick man of Europe”
and…
IMF: “Germany’s Real Challenges are Aging, Underinvestment, and Too Much Red Tape”. LINK
The German private sector falls deeper into contraction:
Productivity levels continue to decrease, as detailed by Moritz Kraemer in FT:
“In no other OECD country do workers spend less time on the job. With labour input shrinking by some 1 per cent a year, labour productivity would need to rise by an equal amount for the economy to stand still. Unfortunately, productivity increases per hour worked have stood well below 1 per cent in recent years. The country’s fundamental speed limit for growth may lie below zero.”
Conclusion:
Of course, the country is going into a recession:
This situation reflects a nation whose leadership, elites, and electorate appear disengaged from the pressing realities they face. Rather than confronting the significant challenges before them, they seem to be procrastinating, ignoring the issues, indulging in unrealistic illusions, and prioritizing personal or partisan interests over the broader national and European welfare.
This lack of engagement in what really matters is exacerbating the problems, not only for Germany but also for Europe as a whole. This inaction signals a potential decline in Germany’s influence within Europe while giving the chance to new power leaders: in the East!
Rocket launches
Until now the score is Silicon Valley 2 - 1 China.
SpaceX and Rocket Lab (US/New Zealand) drive this growth for the free world.
Rocket launches in 2004:
Rocket launches in 2024:
It’s also nice to remind ourselves how it all started:
One of the theories in my incoming book (😎) is that established companies are like the Train de Grande Vitesse (TGVs): they can go only from A to B.
To go to a new location, let's call it 'C', you need a start-up mentality.
Lidl is in the cloud computing business
From Financial Times:
“ Its IT unit, Schwarz Digits — which became a standalone operating division in 2023 — has signed up clients including Germany’s biggest software group SAP, the country’s most successful football club Bayern Munich, and the port of Hamburg. Last year, the unit generated €1.9bn in annual sales and it employs 7,500 staff.”
But how did Lidl end up here? Well…
1/ In tech, you don’t know who will be your next competitor
2/ SAP, Europe’s biggest tech company, is a client of grocery chain Lidl’s cloud and cybersecurity infrastructure. Crazy!!
3/ All data is stored in Germany and Austria, which is in line with EU regulations
4/ Now the company wants to leverage all insights with the local universities. LINK
on work from home, from Carl Pei at Nothing Company:
We’ve come a long way in a short space of time. We are the only company to have established a smartphone business in the last 10 years. We are the fastest-growing smartphone brand in India at 567% YoY.
Yet, we are at 0.1% of our potential. With the solid start we’ve made, we really have the chance to create a generational tech company that can change the world. This is an incredibly exciting opportunity that we’ve earned together, and now it’s time to double down.
We started Nothing during COVID and had to make do with working remotely at first. Later on, we transitioned to hybrid in London and in-office at our other sites. Now, we are announcing the transition to in-office in London too.
I know this is a controversial decision that may not be a fit for everyone, and there are companies out there that thrive in remote or hybrid setups. But that’s not right for our type of business, and won’t help us fully realize our potential as a company. There are three key reasons for this.
First of all, we make physical products where design, engineering, manufacturing, and quality have to collaborate closely together to deliver products to our users. This does not work well remotely.
Second, creativity and innovation are really key to us winning against bigger companies. Not only in products, we also need to solve difficult problems and do more with way fewer resources than competitors in all areas of our business. This does not work well remotely.
Lastly, our ambition level is different from many peer companies that started at the same time. We are not looking to create a good business that gets acquired by a big company, we are looking to realize our full potential of becoming a generation-defining company. And we’re really serious about moving fast. Remote work is not compatible with a high ambition level plus high speed.
Some may be worried about flexibility, but this is no different from pre-COVID. This is a company for grown-ups, so if you need to be out of the office to deal with some issues, we trust you to make the right decision. Some roles like sales and PR need to be out of the office meeting with customers and press regularly.
We know it’s not the right type of setup for everybody, and that’s OK. We should look for a mutual fit. You should find an environment where you thrive, and we need to find people who want to go the full mile with us in the decades ahead.
This takes effect two months from now. In our next Town Hall in London, we can take live questions if there are any.
Thank you all for the progress we’ve made together so far, and I’m looking forward to learning, growing, and building the next stage of the company with you all.” LINK
Artificial Intelligence
Andy Jessy, President and CEO of Amazon, about deploying AI
- The average time to upgrade an application to Java 17 plummeted from what’s typically 50 developer days to just a few hours. We estimate this has saved us the equivalent of 4,500 developer-years of work (yes, that number is crazy but, real).
- In under six months, we've been able to upgrade more than 50% of our production Java systems to modernized Java versions at a fraction of the usual time and effort. And, our developers shipped 79% of the auto-generated code reviews without any additional changes.
- The benefits go beyond how much effort we’ve saved developers. The upgrades have enhanced security and reduced infrastructure costs, providing an estimated $260M in annualized efficiency gains. LINK
Yes, AI is coming for the white-collar jobs in productivity and creativity.
Homework for students? Yes, but…
1/ Completing assignments can be beneficial for students. A study found that in 2008, the vast majority of students (86%) who did their homework saw improvements in their final exam scores. However, by 2017, this percentage had dropped significantly, with less than half (45%) of students benefiting from homework completion. This decline may be attributed to the widespread availability of internet resources, which made it easier for students to copy answers rather than engage with the material themselves.
2/ Similarly, as artificial intelligence tools become more prevalent in education, their impact on learning outcomes will likely depend on how they are used. Students who use AI as a tutor or explanation tool may see positive results, while those who rely on AI to simply produce answers without understanding the underlying concepts may not gain the full educational benefits of the assignments. LINK
LLM commodification is a work in progress. Many start-ups will fail. LINK
Things happen
The Y Combinator approach to finding startup ideas. LINK
Derek Thompson in The Atlantic: “White-Collar work is just meetings now.” LINK
How China could blockade Taiwan. LINK
The perils of American isolationism, by Condoleezza Rice. LINK
[Essay] “What’s Really Going On in Machine Learning?”, by Stephan Wolfram. LINK
Starbucks is launching its famous pumpkin spice latte earlier than ever. LINK
David Perell interview with Ben Thompson. LINK
Industry reports
Chinese EV companies are taking higher and higher losses. On the trade front, China is starting a new war. EV losses, Trade war
Can AI scaling continue through 2030? LINK
Curiosity Corner
On the birth rates front: Mongolia. LINK
Vaccines are miraculous. LINK
Some insights from Peter Thiel’s visit to the Joe Rogan podcast:
1/ AI passing the Turing test
2/ He compares California with Saudi Arabia
3/ Talk is often the substitute for action.
4/ Declining birth rates will lead to huge shifts in society. LINK
Some of the best productivity planners on the market. LINK
⭕️ You generate smokey logograms from the heptapod language as in the sci-fi movie "Arrival"? LINK
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