This Price Is Too High

Last year, on 1 December, the Romanian National Day, I came across an article containing ’30 things that make us proud of Romania’.
Interesting, I thought, a good opportunity to learn more about romanian achievements and find out, what kind of success make people proud of their country.

Well, I wasn’t surprised to find Hagi or Nadia Comaneci on the list – what I didn’t expect, was the great number of inventions among the ’30 things’.

Medical progress (Insulin, ribosome, Gerovital H3 and a cancer-test) or technical creations (ejection seat, self driving car and the hyper CD-ROM) were invented by romanians. And you have all the right to be proud of these compatriots.

Later that 1st December, while deleting the unread mails of the past week, I noticed a release from Eurostat, a provider of statistical data on everything you can imagine. I like statistics, so I opened it.

Eurostat published, that EU members spent 283 billion EUR on Research & Development (R&D) in 2014. The intensity, investments as a percentage of GDP, was 2%, much lower than Japan, South Korea or the US.

I checked the study en detail to compare the intensity on R&D spending between EU members: Finland, Sweden, Denmark – all above 3%, then Austria, Germany – nearly 3%.
For Romania’s figure, I had to scroll down and the number really disturbed me: 0,38% !! This is the lowest intensity within the EU.

To neglect R&D-spending is one of the bigger mistakes, a country like Romania and it’s corporations can make in the current stage of the global economy. The difference between success and failure of an economy nowadays and in the future has one name: Knowledge.

The agricultural-intensive economy was replaced by the labor-intensive industrial age, followed by the service- and finally the knowledge economy. Thereby, quantitative factors of the past – as available arable land or the number of the work force – were substituted by qualitative factors as knowledge – scientia potentia est.

And the global economy is already captured by the next wave – the automation of knowledge. Fintech, for instance, could disrupt the traditional banking system and might have a big impact on the workplace . Global fintech-investments tripled from 4 billion USD in 2013 to 12 billion USD last year. Google, IBM and others all making significant investments in artificial intelligence.

Of course, neither a country nor a company have a guarantee of greater success with higher R&D-spending. But you have the guarantee of failure, if you don’t.

I can tell you that first hand, coming from a small country like Switzerland, with a significantly worse starting position than Romania: no natural resources, no direct access to the sea, little arable land but an awful lot of mountains.

Thanks to twice as high spending in R&D than the EU-average (to a large extend by the private sector) over decades, the small country with the bad starting position today is home to many global players in good paid sectors as pharma or hightech, is leader for the fifth consecutive year of the ‘global innovation index’ and became one of the best developed and richest states in the world.

It’s expensive to invest in R&D and there is no certainty of success, that’s right, the price is high.
But not to invest in R&D and miss the boat – this price is too high.

Only dramatically increased investments in research & development’ today, can make Romania ‘rich & developed’ tomorrow.

On Romanian National Day in 30 years, I’d like to read the ’30 things that makes us proud of Romania’ again. As an update with innovations made by romanians in the 21st century – thanks to considerably increased R&D-spending in Romania after 2015.

———

If you want to learn what’s really important for a successful investor and
get a new perspective about probabilities of failure or success then I suggest that you read the next chapter: http://www.theleader.ro/reading-that-pays/