Holy Roman Empire

Chapter 452: Quantity-Driven Approach

No matter how brutal the means, those without ability cannot play the game. Not to mention the initial capital investment, just getting involved with the Russian nobility is itself a difficult problem.

It’s worth noting that Russian nobles are the most conservative in Europe. A capitalist trying to sell to them would probably not even get a meeting and would be thrown out immediately.

Even if the sales pitch succeeded, encountering a greedy noble could mean having the bonds outright seized, leaving the seller without a single chilling.

Although there was no worry about competitors, secrecy was still important. If the Russian government caught wind of it and patched things up in advance, one would have to wait for Alexander III to repay the debt.

On the surface, it seemed that in this era of the gold and silver standard, the currency wouldn’t depreciate. However, from Franz’s perspective, as long as gold and silver production kept increasing, inflation was unavoidable.

Price stability was relative; a few decades could change many things. During the boom of the Second Industrial Revolution, as long as investments were correctly made, earning several times the profit was not difficult.

There were too many projects involved in the industrial revolution for Franz to cover them all, so venture capital companies could come into play.

Although the concept of “venture capital” hadn’t been coined yet, it had always existed. A well-known example is Lü Buwei, whose “speculation on rare goods” was a successful venture investment.

In Europe, Spain’s funding of Columbus to discover the New World, which launched the Age of Exploration and established the first empire on which the sun never set, is another example.

These are just the successful cases; there are many more failures. History has shown that venture capital is a high-risk investment.

Franz could afford to take risks. In this era, the cost of investing in emerging industries was very low. It was mostly about funding research and development. Once results were achieved, the next step would be investing in building factories.

Even if the investment failed, as long as they acquired relevant patented technologies, the business wouldn’t suffer too much of a loss.

The unfortunate part was that good projects were hard to find. This was only the Second Industrial Revolution, and there weren’t as many projects as there would be in later times. Moreover, due to inconvenient communication, effective oversight was difficult.

After much hesitation, Franz abandoned the plan to establish a venture capital company. The world has never lacked smart people, and venture capital in this era wasn’t nonexistent; it was just limited to small circles.

The idea of a venture capital company investing in hundreds of projects like in later times was entirely impossible. The operating costs alone could crush the company.

After all, the physical economy isn’t like the internet; it can’t produce overnight millionaires. Before seeing any profit, it would be difficult even to go public and raise funds.

…

The actions of Wells Fargo Securities quickly caught the attention of keen observers. Initially, everyone thought Wells Fargo Securities was deliberately spreading positive news or that there was a breakthrough in the Russo-Austrian negotiations.

However, by September, the negotiations between the two countries had concluded. The Russians would continue to honor their debts, but the repayment period was deferred by five years. The originally promised collateral was now merely nominal.

For example, the pledged customs duties now meant that a portion of Russia’s customs revenue would be used to repay the debt. The specific amount was rather disappointing, approximately 200,000 guilders per month.

In total, the income from all collateral combined did not exceed 500,000 guilders, which was less than one-sixth of the actual funds needed.

There would be no penalty fees, as the Russian government truly had no money. Being able to repay the principal and some interest was already considered a favor.

There was no other choice; the debtor held the upper hand. The Austrian government could only accept whatever they could obtain and hoped that the Russian government would repay the rest once their finances recovered.

With only a limited amount of money available, priority had to be given to policy loans guaranteed by the government. As for private loans, it was unfortunate, but they would have to wait for future consideration.

Bonds were even less of a priority. Discussions about repayment would only happen upon maturity. Early redemption was out of the question since the Russian government was not accommodating.

Anyone daring to expect high interest from them had to be prepared to lose the principal. When the Russo-Prussian War broke out, financial experts had already issued warnings.

Although the Russians did not outright refuse to repay, everyone was well aware that it would be challenging to redeem these bonds normally.

The idea that the Russian government’s finances would improve is a fallacy. As long as the Russian bureaucratic system remained unpurged and the issue of corruption unresolved, the finances would never truly improve.

Cleaning up corruption is a hundred times harder than institutional reform. No matter how rules are made, people are needed to enforce them, which creates loopholes.

Establishing authority through executions is an effective method, but unfortunately, Europe does not have a tradition of executing nobles, and Alexander II did not have the courage to set a precedent.

Franz introduced the civil service examination system, but it did not solve the problem of corruption either. In fact, bureaucrats of commoner origin were often even more corrupt.

However, this did create an opportunity for Franz to establish authority through executions. The anti-corruption bureau had work to do, and by occasionally catching and executing a few fools as examples, they could deter the entire bureaucratic group.

With this comparison, dealing with noble bureaucrats would not make the emperor seem excessively harsh.

Seeing that other offenders were beheaded, while nobles only lost their titles or went to prison, it appeared they were being treated leniently.

Moreover, losing a title only applied to life peers. Hereditary nobles would still have their titles passed on to the next in line.

The reason given was not criminal activity but rather insulting the honor of the nobility. Indeed, European noble culture had high standards and requirements.

What one did in private was less important, but openly violating the noble code of conduct would lead to public condemnation.

Many noble bureaucrats, unable to withstand the pressure of public opinion after being caught, chose to commit suicide to end the matter. Once they died, the accounts were settled, and the issue was naturally resolved.

From a modern perspective, this might seem laughable. After all, it’s not like they would be executed. They could serve a few years in prison, wait for the scandal to blow over, and then return to their privileged lives. Why choose suicide?

But in an era where honor was valued above life, maintaining family honor was more important than personal survival.

Under external pressure, while corruption couldn’t be entirely eradicated, it was at least curbed. Unlike the Russian government, where embezzling public funds and openly soliciting bribes were common, few officials in Austria dared to engage in such blatant corruption.

This was something the Russians simply couldn’t emulate. On one hand, the nobility’s power was too vast. Even Alexander II’s reforms were a movement for the nation’s survival initiated from within the noble class.

On the other hand, there was the issue of education. Compared to other European countries, literacy rates in Russia were generally low. Even with civil service exams, few commoners could participate.

Without sufficient numbers, how could they exert pressure on the noble bureaucrats? If only a handful of individuals made it into the bureaucracy, they would likely be suppressed as soon as they entered the field.

In Austria, compulsory education has been in place for many years. Even if only 1% went on to university, 20,000 to 30,000 people still entered higher education annually, and this number increased significantly at the secondary school level.

This vast talent pool was Austria’s greatest advantage.

Quantitative change led to qualitative change. Many who were obscure in the original timeline had now become leading figures of the era, while some once-famous individuals had faded into obscurity.

It turns out that the environment can indeed change a person. Franz no longer believed in the myth of the celebrity effect. Instead, he believed in the significant impact of the butterfly effect.

Before achieving results, the famous figures from the original timeline were no different from ordinary people in his eyes.

Scientific research is full of coincidences. Perhaps changing the day or the laboratory could alter the outcome.

Even an Austrian scientist born one hour later might be affected by the butterfly effect and not exist at all. Such occurrences are common—if the parents faced an accident or if the timing of intercourse changed, the sperm and egg involved in conception would be different.

Even if someone had the same name, it would essentially be a different person. Achieving this could result from something as simple as working overtime or taking a vacation.

The idea of grooming famous individuals was a fallacy from the start. Instead of focusing on such uncertainties, it was better to increase the overall numbers.

With an increase in the number of talented individuals, the number of geniuses would naturally rise. In reality, those who could attend university during this era were already the elite of the elite.

For those lacking sufficient abilities, attending university meant paying to audit classes. If they matured late and eventually passed the graduation exams, they could still earn a diploma.

As Franz knew, every university in Austria currently had a group of auditing students. These individuals were not after diplomas; they simply wanted to improve their abilities.

After all, those who could afford to pay were undoubtedly part of the wealthy class, and whether they had a diploma or not didn’t matter to them.

Not everyone can afford the tens of thousands of guilders required for tuition, which is equivalent to the price of a villa in Vienna. Converted to the 21st century, that would be worth hundreds of millions.

The Ministry of Education intended to increase the number of universities to provide a platform for these wealthy students. After all, these students were cash cows, capable of paying high tuition fees, and the universities could earn a considerable amount from them each year.

Franz knew that the emergence of such universities was inevitable. For the wealthy, obtaining higher education was never a problem.

If domestic universities weren’t available, they could always study abroad. Currently, studying abroad isn’t popular in Austria because the domestic education system is already world-class and has extensive networking opportunities.

For many capitalists, sending their children to study was about building connections and laying a foundation for their future.

If there weren’t these benefits, they could save most of the costs by studying abroad instead, so why would they insist on battling it out in domestic universities?

Take the University of Vienna, for example. The total tuition fees for officially enrolled students over several years amounted to just over a thousand guilders, and they could even apply for student loans.

On the other hand, the cost for auditing students had skyrocketed to 80,000 guilders. Despite the high price, with only 30 slots available, the demand far exceeded the supply. Without connections, it was nearly impossible to secure a spot.

The price was not just for the education but also for the networking opportunities it provided. As Austria’s premier university, it was worth the cost.

Austria had more than forty universities, each admitting about 500-600 students annually, with the largest universities admitting just over a thousand.

With universities not expanding enrollment, these slots became extremely valuable. Unless someone had exceptionally strong connections, the most a wealthy person could get was an auditing student slot.

As far as Franz knew, only a handful of high-ranking noble children managed to get into universities through backdoor methods each year, and most of the time, there were none at all.

If a high-ranking noble’s child couldn't get into a university despite their family education, it usually meant one of two things: either they were not suited for academics or they were wastrels.

Think about it—if the same teachers who set the exam questions were teaching you daily, and you still couldn’t pass the university entrance exam, what more could be said? Even if not every question was an exact repeat, you would have seen every type of question. If you couldn’t succeed with such an advantage, there was nothing more to be done.

If they were useless, for the sake of family reputation, they wouldn’t be admitted to a university where they would only embarrass themselves.

Setting up a university for them is simple, but will it truly gain acceptance? Just as students seek to build networks in college, parents also hope their children will achieve great things.

A school filled with such students would lose its prestige. Besides getting a diploma, how much knowledge could one truly gain in such an environment? Franz was very skeptical.

Although “auditing student” didn’t sound prestigious, every year some auditing students managed to turn things around and earn their diplomas.

These success stories were what encouraged others to follow in their footsteps.

Building a network of connections meant interacting with people who were much better than oneself. If everyone around you were at the same or a lower level, the network wouldn’t be as valuable.

Lowering the quality of the school wouldn’t justify reducing the fees. Otherwise, the Ministry of Education would need to subsidize the school’s operations. Franz would rather use those funds to establish another university to cultivate useful talents for society.

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