Unlocking Economic Potential: Why Czech Investors Must Shift Focus from Real Estate to Innovation

You can also listen to the narration in the audio version.

Money has to go. This is not the life motto of an unknown gambler buried behind the wall of a Las Vegas cemetery, but a rule of thumb for the basic functioning of any modern economy. In companies, they know very well that the best thing for the future is to invest a significant part of the profits back into their development – preferably in education, development and innovation. Experienced and qualified workers, new materials, new technologies, new methods, all this continues to multiply the added value and move forward not only with a specific company, but the entire economy .

Individual investors should follow a similar position, as this principle applies to them as well. Nevertheless, very little happens in our country, and that is why I regret that Czech investors do not invest their money in the economy in a way that the society can get society as a whole will benefit from it in the long run. At the same time, there are already 34,000 people in the Czech Republic who have investment capital of around tens or more million crowns.

In our latitudes, however, they mostly swear by bricks and gold. Real estate and precious metals lead among non-banking products. About 10 percent of Czech investors claim ownership of both. The current concept is that the price of real estate in our country will only increase, so investments in them will only continue to add value. Real estate is considered a safe liquid investment that anyone can handle. According to the majority opinion, they also support economic growth through the development of the construction industry and taxes paid. It is only part of the truth, and it is not enough. For the investors themselves and for the economy as such.

Yes, Czechs invest in shares through mutual funds, but compared to investments in real estate and precious metals, these investments are still relatively small. Mutual funds are popular with a segment of the population who are interested in a more passive approach to investing and want to spread their risk. However, the share of investments in mutual funds that buy shares is still not high enough to have a fundamental impact on the long-term growth of the Czech economy.

There have been several decades of peaceful, contented development in Europe, growth in benefits and social security, which has produced laziness. We don’t have a vision of a goal like hundreds of millions of people in China, Southeast Asia, Africa, or America.

Europe’s population is getting older instead. Italy will be a good example for everyone. While today around 24 percent of people over 65 live there, in 2050 there will be 37 percent of them. At the same time, the total number of residents will be less than 10 percent. A small number of economically active people out-earn a large number of elderly people.

Because we are not willing to accept enough migrants from third countries, we simply do not and do not have enough. An aging population is also conservative and wary of anything new. Attempts at fundamental reforms and innovations are usually thwarted.

This is a very unfavorable situation at a time when you, like the rest of the world, should be implementing innovations in automation, robotization, decarbonisation, that you are at risk of sudden, uncontrollable AI starting to erode your physical and cyber security. , and you have a strong suspicion that climate change is somehow happening faster and more powerful than expected. And you have to invest in all of this.

Europe may soon lose its position as one of the strongest economies in the world. Since 1990, the share of European countries in world GDP has fallen from around 28 percent to less than 18 percent in 2022. First, this was largely because partners others in this indicator cut away from a percentage share in Europe with their own economic growth. Only the BRICS countries improved by more than 20 percentage points over the same period. However, there is now a danger that Europe’s position among the other continents will weaken, not because others are doing better, but because it is doing worse in really. And that is a novelty that we have not experienced for several decades. The warning example of Japan and its stagnation is looming on the horizon. Japan’s share of the world economy has fallen from almost 15 percent to less than four percent since the 1990s. Average economic growth was only about one percent.

This brings us back to thoughts about investments. The foundations of European prosperity will be shaken and changed in the coming period. And there is no room to play it safe during times of transformation. Diversification of geographic and business investments should now be the most important measure that investors pay attention to.

Economic growth in the coming decades will depend on breakthrough innovations. No country will be able to calm such a storm that awaits us by developing the construction industry. Money stored in gold or real estate does not create enough value and will contribute to the economy only in a limited way. If everyone treats them like this, the economy will have nothing to live on properly. The desire for investment certainty ultimately destroys that certainty itself. In the southern states of Europe, we can clearly see, in sick economies that are losing the race to other countries, that real estate markets continue to grow or fall.

The good news is that the best tactics come from threats. It is not a coincidence that Israel, for example, which is always fighting for its existence, is called the starting country. Or that some of Europe’s newest technologies are being developed in the Baltics, which are constantly threatened by Russia.

Trauma creates hard, calm and abundance does not inspire anything. I’m afraid we’ll get a big dose of encouragement soon. But at the same time, I believe we will manage it and come out of the crucial period on a winning wave. Perhaps this is a national characteristic of the Czechs, that they get into everything at the last minute, that they prepare and always somehow save. However, much more could be gained from such a massive resumption of global economic activity.