Holy Roman Empire

Chapter 444: Clash of Ideas

After the news spread that the Bosnian province planned to establish itself as a heavy industry powerhouse, it immediately caused a stir in capital circles.

For outsiders, it was just a spectacle, but insiders saw real potential.

Heavy industry always requires substantial and long-term investments. It’s normal for an investment to take years, even decades, to break even.

On the flip side, once a company grows in this industry, the profits can be significantly higher. The high entry barrier eliminates most competitors, so heavy industry companies face far less competition compared to other sectors.

Austria’s economy was just emerging from a crisis and entering a period of rapid growth, with skyrocketing demand for steel and copper, leading to a supply shortage.

In theory, as long as production was achieved, these two products would have no trouble finding buyers. However, joining this industry wasn’t simple and would not yield results for 1-2 years.

Based on past experience, from finding a suitable site to producing the first product, it would take at least 2-3 years.

In reality, the timeframe was even longer. Preparatory work, like internal planning, was essential. Such significant investments required organizing professionals for mining exploration, conducting comprehensive cost evaluations, considering transportation logistics, and performing market analysis.

There were no specialized agencies to handle these tasks back then; investors had to organize and make all the judgments themselves. Even with bank loans, the initial investment would be at least several hundred thousand guilders.

This high barrier to entry eliminated most people from the outset. Without sufficient funds, there was no point in trying. This industry was the domain of capital giants, leaving no room for survival to small workshops.

Trying to get something for nothing was impossible. Banks were privately owned and each had stringent auditing processes. Without collateral, no one could secure large loans.

In this era, heavy industrial investments had already climbed to millions of guilders, and spending tens of millions was not out of the question.

The most valuable assets weren’t the machinery but the raw material mines. Austria had no shortage of cheap mines, but their low cost implied significant extraction difficulties or low-grade ores of marginal value.

Experienced professionals knew better than to go for such bargains. If production costs couldn’t be controlled, the enterprise would collapse at the first sign of an economic crisis.

Operating mines and smelters separately was unheard of. The trend was toward conglomerates and integrated supply chains, typically offering services from upstream raw material production to downstream product sales.

Industry segmentation only happened when local raw materials were exhausted, necessitating external purchases. This would significantly increase costs, which capitalists disliked.

The biggest problem in French industry was the need to import coal, which increased production costs. This was also why Napoleon III coveted the Rhineland region.

The Vienna Starbucks Club, with a name reflecting Franz’s quirky sense of humor, was a testament to his habit of bringing to life any famous company he remembered.

Of course, many of these had changed. Over time, memories could become fuzzy, and companies with familiar names might operate in completely different fields.

Michelin could become an ice cream brand, Country Garden could be a park, and many company names had been playfully altered. If another time traveler appeared, they’d be thoroughly confused. These changes were destined to remain unknown.

Inside a private room, several middle-aged men played bowling while chatting leisurely.

A middle-aged man threw a ball and, smiling, asked, “Thor, are you really planning to invest in heavy industry in Bosnia?”

Thor smiled slightly and said, “A strike, Wells, your skills have improved.”

Walking up, he threw his ball, sighed, and added, “Yes, I do have such plans. Most industries in the country are saturated. Emerging industries seem promising, but we can’t get into them.

The Austrian New Energy Power Company has too much of an advantage. Even if we joined now, we would only get a small share of the pie.

Continuing solely in finance isn’t reliable either. Our investments are too concentrated, making us vulnerable to risks. Although heavy industry requires significant upfront investment, it has great development potential.

Compared to emerging industries, these technologies are already mature. You know, I still own a half-dead steel factory, so entering this industry isn’t completely without foundation.”

Everyone present was shareholders of the Austrian Savings Bank and also the behind-the-scenes bosses of several securities companies. Some had even transitioned to noble status.

However, these big shots also felt a sense of crisis. As financial regulations became more standardized, the risks of manipulating the stock market grew increasingly high.

As members of the emerging nobility, they were also keen to preserve their reputations. No one wanted to struggle to climb into high society only to be immediately disgraced.

It should be noted that their titles as non-hereditary nobles also had another name: quasi-nobles, or probationary nobles.

During this stage, old aristocrats would scrutinize them closely. If they made any mistakes, they could easily be knocked down from their positions.

Austrian noble titles were not cheap. If you were lucky, you might secure a title for tens of thousands of guilders, but if unlucky, even millions could be wasted without success.

The military merit system for ennoblement was biased against these moneyed newcomers. Even if they organized expeditions to colonies to earn military merits, the rewards would be distributed among the participants, not solely to the financiers behind the scenes.

Gaining a noble title domestically was even harder. Only those who made significant contributions to society and gained Franz’s recognition had a chance of receiving a title.

Since Franz’s ascension, only two capitalists had achieved this feat. In contrast, more than twenty scientists have been ennobled due to their technological inventions.

Wells shook his head and said, “Thor, you’re too optimistic. I think mining salt in Bosnia would be more profitable than heavy industry, at least the return on investment would be quicker.

The heavy industry sector is dominated by the Austrian Steel Group, a state-owned enterprise with a significant advantage, monopolizing nearly half of the country’s steel production.

Trying to outcompete them is too difficult. Other industries might be a better bet. Even the newly rising Austrian New Energy Power Company doesn’t have such a significant edge.”

Thor threw another bowling ball and said, “It seems we are unlikely to convince each other.

The Austrian New Energy Power Company relies on a win-win cooperation model, launching attacks across the European continent. Even in Britain and France, they have a significant market share.

Although this share is currently potential only, they have already established a system. Most power companies have become their strategic partners, and unless something unexpected happens, this potential will become a reality.

Once copper production increases and the cost of electrical equipment decreases, the majority of Europe’s power supply will be monopolized by this alliance. I don’t think the power company you’re dabbling in can break through.

On the other hand, the Austrian Steel Group is easier to deal with. They are a state-owned enterprise, and apart from normal business competition, they won’t completely crush us.

As long as the supply-demand relationship doesn’t change, there won’t be direct conflict. This gives us plenty of time to develop and grow.”

This is a fact. The monopoly established by the Austrian New Energy Power Company is mainly based on their standards system, which also promotes their equipment.

In the subsidiaries established in various regions, the Austrian New Energy Power Company doesn’t hold a dominant share; most of the shares have been distributed. In some regions, they have simply taken a stake based on their technology.

This is the benefit of having core technology. Even if they are not the majority shareholders, their influence in the company remains significant, ensuring they aren’t sidelined.

As newcomers, breaking such a monopoly is extremely difficult. The biggest challenge is the lack of core technology, making it impossible to overcome patent barriers.

No one knows when they might develop another system. The market waits for no one; once a standard is widely adopted, it becomes difficult to enter.

It’s not a matter of whether it’s feasible to replace an existing power supply network with new technology standards, but rather why anyone would want to switch.

Without significant benefits, who would abandon established equipment for new, unproven power equipment?

Only if they can introduce a new technical system before the current standards become ubiquitous, and successfully implement it in practice, would they stand a chance of competing.

Wells waved his hand, showing an innocent expression, and said, “Alright, I give up trying to persuade you. But, my friend, who said I was going to compete with them?

Yes, I’m investing in a power company, but the disparity in our capabilities is too great. Jumping into the power supply system would be suicidal.

According to the engineers, not to mention circumventing patent barriers, even without patent restrictions, it would take at least three to five years to completely replicate their technology.

This is a complete technical system, not just a single technology. Every component is essential. Otherwise, the British and French wouldn’t be purchasing patent licenses but would be creating their own systems.

My investment in the power company focuses on the industrial applications of electricity, using electrical machinery to replace the steam engines currently on the market. We are not competitors at all.”

Theoretically, these technologies have unlimited potential, but the required investment is substantial. Wells’ attempt to persuade Thor was essentially a matter of funding.

It’s not that he lacks money. It’s mainly that the research and development of new technology is fraught with uncertainty, so he needs to find someone to share the risk.

Judging by the current market situation, these new technology companies have the shortest lifespans and are the main contributors to lowering the average lifespan of Austrian enterprises.

In contrast, traditional businesses are much more resilient. Surviving for 20-30 years is normal, and there are even quite a few century-old enterprises.

After all, traditional industries are asset-based, and their assets can be sold off. Many companies have changed hands multiple times and still managed to survive.

On the other hand, high-tech innovation industries are different. If they are lucky and develop new technology, the company has value; if not, the company is worthless.

Companies without tangible results don’t last long, as investors’ patience is limited, and no one is willing to wait ten years for a breakthrough.

The shortest-lived technology companies have only a few months of life. If they fail to develop a technology before a competitor does, investors will consider them unviable and abandon them.

The capital market is that ruthless—survival of the fittest.

It’s not surprising that capitalists are reluctant to invest in new high-tech companies. The risks are too high, and even if they succeed, the innovations may not have commercial value.

As a result, most technological inventions and innovations in the 19th century were driven by individuals. Once they had results, capital would then flock to them, spurring a technological revolution.

If it weren’t for the sudden rise of the Austrian New Energy Power Company, which turned Vienna into a city that never sleeps and demonstrated the importance of electricity, the electric power industry wouldn’t be receiving so much capital interest.

Even so, capitalists are still trying to mitigate risks. This is one of the reasons why the strategic expansion of the Austrian New Energy Power Company has been so smooth.

The debate between the two men is one of investment philosophy, with no right or wrong, only what is suitable.

Their decision not to enter the fiercely competitive light industry sector is proof of their foresight. Of course, the recently ended economic crisis must have been a significant influencing factor.

Capital does not shy away from risk, but capitalists have an inherent instinct to avoid it. Everyone knows that an industry with overcapacity is a sunset industry.

Surviving in a sunset industry is challenging enough. Expecting to make huge profits is clearly unrealistic.

Seeing the situation was getting a bit awkward, their colleague Lawrence Lofsky changed the subject, saying, “It’s almost 12 o’clock, we should have lunch. I think the beef at that restaurant next door is pretty good, why don’t we give it a try?”

Thor smiled and said, “I prefer their roast goose. What about you?”

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