[JonChesterfield]

Alternatively they've been completely skewed by the profit margins of the big software companies, where it turns out they print money regardless of how high payroll gets. As supporting evidence, VC funded startups pay less than said software companies.

It's interesting that Europe has abjectly failed to produce anything like Google or Meta. I'm not sure what the underlying reason for that is.

[JumpCrisscross]

> they've been completely skewed by the profit margins of the big software companies

This is correct. VC-backed companies aren’t leading base compensation gains.

[sofixa]

> It's interesting that Europe has abjectly failed to produce anything like Google or Meta. I'm not sure what the underlying reason for that is.

There isn't a singular reason, it's a complex combination. Btw I'd like to preface this to say I'm not sure most Europeans actually want a Google or a Meta, there is aversion to "too big to fail" companies in most sectors.

* investment money - VCs bet on tons of stupid things with the hope of some of them making it. Many a crappy business model has received hundreds of millions of investments to try and make it, and companies spend years chasing growth on the back of those investments without worrying about profitability. Investment in the EU is usually more conservative and grounded in reality - a business model of "we'll give it away at a loss for 10 years to get lots of market share and then increase prices to capture the market" simply won't fly here.

* "Europe" isn't a single market in most important senses of that word. Each EU country has it's own language (okay there's some overlap like Czech and Slovak, Belgium and France/Netherlands, Ireland and UK before Brexit, but generally), laws, regulations. A single business can't just immediately serve the whole of the EU without doing due diligence, translations, checking what regulations might apply for them, etc. That means that the size of the potential market is limited from the start without extra investment. A French startup can only sell in France until they figure out what is needed to sell in the Spanish market, translate websites/products, hire support people that speak Spanish, etc. etc. etc. There are tons of good quality decently successful European startups, but most stay within one or a few countries. Exceptions are purely digital companies such as Spotify who can afford to sell all around the world with relatively few hurdles.

* Regulations and common decency/fear - over here, a business model of "we'll fake sell medical devices" or "we'll trick people into giving us all their movements/desires/internet history and sell that to whoever wants it" will hardly fly. Not that there aren't unscrupulous people here, there are, but it'd be harder to get investment and talent to work for you.

* Better... I'm going to go with social safety net, but that's only a part of it. Over here, people are generally more content and know they have things to fall back on, including retirement. FIRE (Financial Independence, Retire Early), "grind mindset", "hustle mindset" and similar are quite rare here. People prioritise other things than work, don't live to work, and don't measure themselves (only) on work. So hustling to hit big and become massive is much more rarely seen as a good or desired thing.

People often deride the EU for "lacking innovation", but IMO that's flat out wrong - those people use wrong measurements (lack of massive tech giants) to define innovation. There are tons of European startups and scaleups and mittelstands and b2b companies of all sizes that are successful and innovative. They're just not "infinite growth" global behemots, but.. do they need to be? Is that the thing that ultimately matters?

[JumpCrisscross]

> tons of European startups and scaleups and mittelstands and b2b companies of all sizes that are successful and innovative. They're just not "infinite growth" global behemots

If their business has no economies of scale, no. If it does, they won’t survive without subsidies.

At a certain point, subsidising a low-scale domestic replica of an efficient international option breaks due to (a) the internet and consumer choice or (b) cost.

[sofixa]

If the market was theoretical and all things were absolutely equal, yes, maybe, but that's not how things work in the real world.

For a good example, Walmart failed miserably in Germany because they failed to understand the local market in any way. You can have a successful regional chain of supermarkets without it needing to become Walmart-scale. Just being local, having a strong local presence and understanding of the market, and having local costs can be a massive advantage. A Bulgarian startup has economies of local labour costs that can trump the economies of scale of Google. Spotify are quite successful even if their competitors (Apple, Google, Amazon) are massive. Not to mention there are big market segments where economies of scale across markets simply do not apply. Legalstart, a startup doing "law services online" for small and medium enterprises in France cannot apply pretty much anything to any other country due to the different legal systems. If there was some massive behemoth in that space globally, Legalstart still wouldn't have an "economies of scale" disadvantage.

[bluGill]

There are a lot of businesses that are great for a small shop and will make a lot of money, but they have no potential to grow larger. Those businesses are not a domestic replica of some efficient international option as there never will be an international option. If you to become a billionaire you have to start one of those international businesses, but if you are content with a million you can get that on a much smaller local company and you don't have to deal with investors at all.

Software does lend itself to international options more than other fields as the upfront costs are high and ongoing costs are low. (compare to plumbers where you can start a company with a van and a fittings, but you have to pay the plumbers you hire every year - by the time you pay the plumbers and the office workers to schedule them there isn't much $ left over)

[JumpCrisscross]

> lot of businesses that are great for a small shop and will make a lot of money, but they have no potential to grow larger

You’re describing businesses without economies of scale. They can compete simply by being local.

[johnnyanmac]

Scale seems relative here, no? Scaling to serve a few nearby countries is still some sort of scale, just not worldwide scale.

[JumpCrisscross]

Economies of scale can plateau, yes. In those cases I’d argue there’s a niche for a medium-sized company. (Most law is in this category.) But if there are further economies of scale, the company that seizes the worldwide market will simply have lower costs and more R&D capital to work with.

[grumpymouse]

I would argue that many of the big tech companies have also been subsidised rather than being efficient. It has just been private investors rather than governments (and it feels like we are starting to see the end of that).