[ProfChronos]

Interesting timing: we have the same debate rising up in France with the acquisition of Medtech (Rosa medical robots) by Zimmer Biomet [1]. CEO and founder, Bertin Nahum, said he had to sell as he couldn't find the right funding in FR/EU. Real shame and also a sad day for France (med)tech

[1]http://www.reuters.com/article/idUSFWN1A40EO

[demonshalo]

It's simple. Europe has no money. The middle class has no savings and the investment sector is far too regulated, confined and incapable of looking at a multi-year timescale.

[ProfChronos]

"The middle class has no savings" => France saving ratio is 15% vs 5% in the US, so that's definitely not the point.

[kalleboo]

> It's simple. Europe has no money.

And stagflation Japan is doing great?

I think SoftBank/Masayoshi Son is enough of an outlier that you can't make any extrapolations from this investment. This is the guy who was crazy enough to buy Sprint

[Symmetry]

Stagflation?

http://www.tradingeconomics.com/japan/inflation-cpi

Japan's inflation has been hovering around 0% for a decade. Unemployment is low too. The problem is a shrinking working population and low productivity growth.

[toyg]

The investment sector is simply too conservative, for historical and cultural reasons. Regulation is mostly an excuse, a fig leaf for a spiritually-bankrupt upper class.

[Brakenshire]

The English Upper Class does have a long and storied tradition of rent-seeking. If you can extract so much value out of something like housing, it's difficult to see why you would get involved in anything risky and technical.

[roel_v]

Why is real estate investing 'rent-seeking' and buying a tech company an 'investment'?

[skewart]

Real estate investing is not inherently rent-seeking. The fact that the word "rent" is in "rent-seeking" and we pay "rent" for an apartment seems to often cause some confusion.

Rent-seeking involves seeking out regulatory or other non-market protection for a stream of revenues. Taxi medallion companies lobbying city governments to restrict the supply of medallions is a textbook example.

That said, a real estate investor certainly could engage in rent-seeking behavior. For example, they could lobby a city to restrict new development, thereby reducing competition and protecting or increasing their revenue. In practice, companies that invest in stable real estate assets (e.g. REITs) typically don't do this. The incentive structures in the industry don't really support it. I'm sure it does happen in some cases though.

Now, to be fair to the GP comment about the "English Upper Class" it's not entirely unreasonable to accuse them of rent-seeking for their land holdings. With very broad brush strokes, there are a lot of "Upper Class" English people who own a lot of incoming-producing real estate who also push very hard for historic preservation laws that restrict new construction - e.g. Prince Charles and his friends.

[morgante]

> For example, they could lobby a city to restrict new development, thereby reducing competition and protecting or increasing their revenue.

You don't have to be the one to create a rent-seeking opportunity to be the one who benefits from it.

The fact that many desirable locales have strict zoning regulations to restrict development absolutely turns homeowners there into rent-seekers. They're exploiting a stream of income which only exists due to government intervention.

[pjc50]

The tech company wins or loses based on innovation (unless it goes the monopoly route, in which case it's back to rent-seeking).

Real estate is scarce, inherently exclusive by location, and limited in supply by planning law. The amount of money returned by real estate is totally out of proportion to the work involved in its maintenance.

[DominikR]

> The amount of money returned by real estate is totally out of proportion to the work involved in its maintenance.

And what is the work involved in building a housing unit? If you build one in most of the EU capitals today you can expect to get your investment back after 30-40 years if you rent it out. (that's why most just sell the housing unit)

Would you make an investment in a company expecting to get your investment back after 30 years? I certainly wouldn't because I want to make profit while I'm still alive.

If housing units would grow like trees without human interaction then you'd be right, but each one of them had to be built in the first place.

[roel_v]

So if I have, say, a machine that makes t-shirt more cost-effectively than my competitors, your claim is that I'm 'rent-seeking'? Do you think that because it's not innovative, or because I'm the only one with such a machine?

(This is a trick question. Before you answer, please make sure you actually know what 'rent-seeking' means, because it's obvious that most other commenters don't.)

[daemin]

Because owning a piece of property and charging for it is just extracting value out of something static. If investing in a company building or producing something you're helping create value.

[DominikR]

This would be the case only if the piece of property was always there and no one had to build and maintain it.

For houses this is not the case. You actually have to produce houses and you have to constantly work on them so they don't collapse after some time.

[itp]

Because one is literally the definition of rent-seeking[0], and one is not.

[0] https://en.wikipedia.org/wiki/Rent-seeking

[roel_v]

Despite having linked to literally the first google hit on 'rent seeking', you obviously don't even know what it means.

[DominikR]

Did you care to read the content of the link you posted?

Because then you'd know that housing is not rent-seeking by this definition as there clearly is a contribution to productivity.

Houses have to be built, maintained, developed and advertised on the market. And there are a lot of risks in this business.

[B1FF_PSUVM]

They're sticking the money into tourism and luxury real estate.

Something to do with the southern side of the Mediterranean being ... uh ... in worse shape safety-wise than the northern. So far.

[ricksplat]

Too much savings is the problem, and no political will to introduce policies to get it moving again. Austerity kills spending.

[kriro]

How is this a problem? You don't save to hoard, you save to use that money later. Delaying the urge to consume in favor of investment is very much correlated to the growth of an economy (afaik, not an economist but a somewhat interested layperson).

[ricksplat]

You say it yourself: Saving to use that money later. Which is an issue as economic measurements are based on what the economy is like at the present moment. If a large amount of people's capital is sitting dormant in bank accounts it can't flow through the economy. This used not to be such a huge problem because banks were allowed to re-invest savings (fractional reserve lending), but this changed after 2008. The problem with Austerity is that it doesn't encourage people to spend. It damages consumer sentiment, which makes people more inclined to save for a rainy day, which has a knock on effect in the shops and restaurants, and ultimately the tax take that these businesses bring in. Of course, if all people were rational, and self-interested this may not be a problem, but this is counterbalanced by Keyne's "Animal Spirits" or the irrational behaviour of people en mass. I'm not saying that either style of economics is 100% right or wrong, but that it is a delicate balancing act between the two.

[toyg]

No, these savings are just offsetting shrinking retirement and welfare provisions from the State. They do very little for investment (pension funds are naturally conservative) and nothing for immediate consumption, grinding the overall system slowly to a halt. Japan historically has a similar problem due to cultural elements, Europe is getting there because of prolonged austerity "reforms".

[derriz]

Where do you imagine the saved money goes?

In a modern economy "savings" equals investment. Even using a bank deposit account transforms one persons savings into another's business loan or mortgage.

This seems to be a widely held misconception - that savings are economically inert - a bit like a squirrel's nut hoard.

[toyg]

Nah, between "firewalls" and rock-bottom central bank rates, money invested (or rather multiplied, through fractional etc etc) by banks today is not coming from savings. Which is why returns on savings are basically non-existent; but it's the only wealth accumulation available to everyone, and in times of "austere" frugality with uncertain job prospects, people keep accumulating them anyway.

[xenadu02]

The massive accumulation of capital to the top 1% means competition for investment opportunities... aka capital is really cheap as investors hook up the money funnel to anything that smells like yield. That encourages malinvestment.

Businesses don't need loans when they don't have customers with money to spend.

[ricksplat]

> In a modern economy "savings" equals investment

This, is a widely held misconception. A bank is no longer allowed to re-invest more than a small proportion of it's customers' savings.

https://en.wikipedia.org/wiki/Fractional-reserve_banking#Res...