Risk Archives - understand-culture

Personal liability

Germany is a country based on the rule of law. And there are many laws in Germany. The Germans abide by them. For Germans, rules and regulations are one way to reduce risk of personal liability. This can make working with Germans difficult for non-Germans. A conditional German yes might very well be based on the fear of being made personally responsible for the outcome of an agreement.

Working with Germans or setting foot on German soil immediately involves coming in contact with German laws. Why are escalators in Germany so slow? Because the store owner is liable for any accidents.

Bus drivers in Germany will only let passengers enter or exit at designated bus stops, even if it is only ten meters away. For legal reasons. When sending an email to a group of friends the other email addresses should not be visible. Personal email addresses are private and protected by Datenschutz, information privacy protection laws.

Computers often need repair. Employees of companies are not permitted to take action, unless they are in the IT department. If repairing leads to further damage, the employee is personally liable. For it is not their job, but the employer‘s, to repair company equipment.

The same goes for cleaning. Rolling up your sleeves and cleaning dirty windows in your office is a nice gesture, but not a good idea in Germany. The employee is liable for any injury incurred during the cleaning. The company‘s insurance company certainly will not pick up the costs. And the company can even charge the employee for not focusing on the work they are paid for.

German laws also prescribe clearly in which locations what kinds of commercial space can be used for. Many an organization has learned the hard way that the space they rented cannot be used for the purposes they intended.

Fehlerkultur

Fehlerkultur – literally failure-culture – is defined by sociologists as the way in which societies react to failure (mistakes) and to those who commit them. A German psychologist took a closer look at Fehlerkultur within German companies.

In the past, innovation in Germany, he wrote, was the product of a long collective decision making process. The great inventions of the Industrial Revolution in Germany were very seldom the result of an individual genius, but instead the achievement of groups of men and women.

Problems (mistakes, errors, failures) were identified, analyzed and solved collectively, as a group. The final product was ausgereift – technically mature, well-engineered, sophisticated. American-styled “trial and error” does not exist in German thinking, which is why there is no accurate German translation for it.

The negative side of this German national-cultural strength is that a systematic, perfection-oriented group approach to solving problems (to innovation) requires patience and time. And time is not always offorded by today’s rapid market developments.

It is in such circumstances, according to the study, that the Germans inclination to blame those who take risks and inevitably make mistakes comes stronger into play.

Mistakes are deemed almost as a personal and professional transgression which demand being exposed, and the perpetrator punished. This heightens even more the innate German fear of commiting errors, which in turn stymies creative thinking.

Germany. Geography. Risk.

How a people understands risk is based on its experiences as a people, on the decisions it has made and on their ramifications. Decisions take place within a concrete context, within certain parameters, such as geography. Germany lies in the middle of Europe, has always had a number of neighbors, some friends, some foe, others neutral.

Germany’s topography offers little protection. In the East vast flatlands flow into the steppes of Russia. Never a maritime power, Germany to the north has only narrow access to the high seas. With the exception of the Rhine River, there are also no natural barriers in the West offering protection.The Alps to the south offer protection, however.

Compared to such countries as the U.S., China, Russia, Germany has limited natural resources. The U.S. is a continental nation, defended by oceans to the East and West. Great Britain, once a great power, has forever enjoyed the protection of the seas as an island nation.

Any mistakes Germany made in its relations with its neighbors and the powers beyond was felt directly by its people. Time and again in its history devastating wars were fought on German territory, decimating its population and ravaging its economy. For some of the wars the German people have themselves to blame. For others they were victims.

Risiko or risk from Italian risico: to do something involving a certain degree of chance, with possible negative effects; possibility of significant loss, failure.

Germans often say auf Nummer sicher gehen, literally to play the safe number, when they want to avoid unnecessary risk. Germans prefer to “check twice and be sure”. They check, test, question, analyze. They’re often considered to be overly detailed, risk averse, even pedantic in their approach. Being particularly careful may test one’s patience, but the Germans would rather be safe than sorry.

Or lieber den Spatz in der Hand, als die Taube auf dem Dach, figuratively “better a bird in the hand than two in the bush“.

Nuclear energy? No thanks!

The German anti-nuclear-energy movement began as a social movement back in the 1970’s. It was directed against civilian consumption of nuclear energy. In comparison to other European countries, the movement has also received both the strongest and most continuous support in Germany. The anti-nuclear-energy movement is strongly connected to the environmentalist movement: Greenpeace, BUND and Robin Hood, for example, categorically reject the use of nuclear energy.

The accident on Three-Mile-Island in 1979 and the catastrophe at Chernobyl in 1986 provided the movement with new fuel. In 2000, the Schroeder-Fischer government began the process of phasing out the use of nuclear energy throughout the country.

While in 2010 the Kohl-government was gearing up for an extension of the run-time of the remaining nuclear plants, the German reaction to the nuclear incident in Fukushima in 2011 forced Chancellor Merkel, an advocate of nuclear energy, to reconsider this decision. Germany now plans to phase out nuclear energy completely by May 30th, 2022.

Fukushima ultimately resulted in an acceleration of the phasing-out of nuclear facilities in Germany. One year after Fukushima Chancellor Merkel defended her decision: “As we have witnessed, risks emerged in a highly developed industrial country, which we never would have considered to be possible. That is what convinced me that we should accelerate the phase-out”.

Meanwhile, Japan continues to invest in the nuclear industry. Great Britain is planning the construction of a new atomic plant. Even in France Fukushima could not slow the success of the nuclear industry. And in the USA, Fukushima also had no significant impact on opinions on nuclear energy held by the President and other politicians.

The German anti-nuclear energy movement and the nation’s response to Fukushima demonstrate the unique understanding that Germans have of risk.

Citizens exposed

Towards the end of 2014, the German Postbank conducted a study with the goal of identifying the good policies which Germans enforce with regard to their financial matters. The results were summarized in article titled When it comes to money, Germans are bureaucrats who are afraid to take risks:

“Like a pillar of economic wisdom, the desire to have a higher income looms above all other factors. The remaining results are actually more reflective of the ‘financial illiteracy’, which the Germans are already often credited with.

In this way, the study exposed the citizens as being fearful bureaucrats, who above all just want to increase their personal wealth through taxation, saving, and maintaining better control of their finances, rather than earn money through smart investing, or saving for retirement.”

Risikoscheu – A fear of risks: The attribute of a decision-maker to prefer the path of lesser risk – and thereby most minimal loss – when confronted with several alternatives which have an equal anticipated gain. This may mean waiting longer for the same reward, or even settling for a lesser gain, if the chances are greater that it will be received.

Decision-timid

Enscheidungsscheu – literally decision timid. In simple English: afraid to make a decision.

„Mit dem Kopf durch die Wand” – trying to go through the wall with their head. Impatience. „Die Hausaufgaben nicht gemacht” – haven’t done their homework. Aktionismus. Actionism. Cowboy mentality.

Germans see these as American tendancies, and believe that they are based on a lack of training, technical competence and methodology. “They simply have not learned these things,” is their explanation.

On the other hand, Americans view the German approach as time-consuming and academich-philosophical. German decision making can come across as decoupled from the goal which is to take. Germans, from the American perspective, take subjective factors too little into consideration. Their analysis is too complex, going well beyond the needs for making a decision.

Americans see their German colleagues as overly careful, far too scientific and schematic-tool oriented. They are reluctant to consider input based on experience and common sense.

Germans give the impression of striving to complete the perfect analysis, which in turn should be some kind of guaranty for the perfect, and therefore risk-free, decision. All of these are signs to Americans that their German colleagues in the end are simply afraid to make the tough decisions.

Frederick August the Procrastinator

Frederick August, the King of Saxony, was one of history’s great procrastinators. While he began as one of Napoleon’s greatest foes, he soon became his greatest ally. In return, Napoleon elevated him from prince elector to king.

But by 1813, his alliance with Napoleon would cause him to lose the Battle of Leipzig. Though Frederick August was careful in attempting to side himself with the great forces who opposed him, a treaty that he had made with Austria eventually dissolved. Taken into captivity by the Prussians, Frederick August was forced to turn more than half of his territory over to his archrivals.

But why was Frederick August on the losing side of the Battle of Leipzig? Historians consider him to have been incapable of making decisions. He is credited with coining the phrase “no decision is better than a bad decision.”

During the revolt he spent his time sitting almost apathetically in the basement in the city hall of Leipzig. To add to the confusion, Frederick August was an exceptionally unpredictable monarch; very few rulers changed their mind so often.

Not only was he incapable of making decisions, but as soon as a decision was made it essentially would have lost all meaning in the moment of its creation, having already been undermined in significance and seriousness by the probability that Frederick August would again change direction.

Every fifth DAX share

German investors have a safety first mentality when it comes to money. Their aversion to risk is often attributed to the economic turmoil of the 20th century. The hyperinflation of the 1920s and the devastation of two world wars have burned themselves into the nation’s psyche.

Since early 2009, the share prices of DAX-listed companies have tripled on average — an increase of €800 billion, or $860 billion. Germans park their money in safe investments like savings deposits or life insurance policies.

54.3 percent of shares in the DAX are held by foreign investors — more than ever before. U.S. investors are the biggest single group of foreign investors. Every fifth DAX share is owned by North American investors.

Business failure is Personal Failure

The Handelsblatt Global Edition from April 23, 2015 reported: Philipp Gloeckler’s business idea was a failure, and he doesn’t mind admitting it. He had what he thought was the perfect concept, an impeccable business plan and great press coverage. Yet, his app, Whyownit, was a disaster.

This is how he found himself at the F***UpNight event in Berlin, a get-together where failed start-up entrepreneurs pick through the bones of their mistakes in the hope that they can do better next time.

“Business failure is often equated to personal failure in this country,” said Rolf Sternberg, a researcher at Leibniz University in Hanover, who recently co-authored a study on young entrepreneurs. “We would win a lot if we would accept failure as a new chance,” he added.

Other than SAP, the software giant founded in 1972, no German tech company has made it onto the global stage. Instead German entrepreneurs are better known for their pursuit of perfection, and finding success within established structures, such as the car industry.

“I am convinced we need to talk about mistakes,” said Béa Beste, whose toy app, which allowed users to subscribe to a toy delivery service for kids, collapsed with the loss of all her investor’s capital as well as her own €300,000 ($322,000). “The worst mistake is being afraid of mistakes,” Ms. Beste said.

Venture capital is scarce in Germany’s risk-averse, conservative economy, so entrepreneurs usually turn to bank loans for funding. But if their business fails and debts are called in, they must go through a lengthy insolvency process which can demand up to six years of “good conduct” before the slate is wiped clean.

“Sitting out“

Former German Chancellor Helmut Kohl was often innaccurately portrayed as the master of Aussitzen (sitting out) by journalists and political elites alike. Instead of approaching a problem directly, it was said that he would wait until it would either resolve itself or people would lose interest in it.

But even with Kohl’s retirement from politics,“sitting out“ political issues supposedly has not gone out of style. At least according to Stern maganzine, which claims that Angela Merkel has become the new representative of this style of governing. As Wochenmagazin wrote in March 2010: “Angela Kohl – wait it out, weigh it out, sit it out. Chancellor Merkel reveals herself ever more strongly to be an adept pupil of the greatest sitter-outer Helmut Kohl”.

More accurate is that Kohl was and Merkel is a master of thinking things through, patience, and building consensus.