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Where Is Europe's Silicon Valley?
An anonymous reader writes: A New York Times story delves into the conundrum faced by Europeans: Why are there few, if any, technology companies from Europe with the size and reach of American tech giants like Google, Amazon, and Apple? The article hypothesizes that, though employment regulations and other business and legal factors play a role, it's actually deeply embedded cultural differences that are the primary cause, citing less aversion to risk-taking, less stigma from business failures such as bankruptcies, little or no stigma from leaving and rejoining a company (seen as disloyal in European cultures), more acceptance of disruptive innovation, and a less rigid educational system that allows individuals to find their own form of success.
This is probably difficult to understand for Americans, but the key factor that makes SV so amazing is that venture capitalists over there are a century ahead in terms of taking risks than anywhere else in the world (save for, maybe China at this point). Instead of betting in a few large projects, they bet on few smaller projects. Most will fail but those that succeed usually return huge profits.
In contrast, everywhere else, investors are much more concerned about minimizing risk and focusing on commodities such as building houses, selling mattresses, etc. Silicon Valley is so different that you can find VC offices next to an ice cream store in the middle of the street.
In California! Of course! So is Russia's and China's.
“He’s not deformed, he’s just drunk!”
Neither Google, Facebook nor Uber is about innovation. It's about implementing an idea that's obvious in its time and bringing it to customers. The 5% inspiration, 95% transpiration stuff. And they did it very well.
The US's distinct advantage: Immediate access to a 320M people market with the same language
and very similar culture. Thus able to reach critical masses much faster, hence ability to collect
more venture capital, grow bigger etc. Less need for internationalization in the early phases (no, it's not just
about translation!).
Other factors may also play a role, but I think the above one is the main factor.
No reason to worry, though, Frau Moser. Diversity has other advantages, and the world would be a boring place if
everywhere would be like Silicon Valley, even though I like it.
All of with lead to a more equal society in Europe instead of a winner-takes-all-screw-the-rest situation like in the US.
I think this is because of a misguided desire to turn employment into some kind of welfare system.
I think a better approach is to combine a super-efficient hands-off capitalist economy with a highly socialized government. Regulation on business should just be to deal with externalities (pollution/etc) and to prevent the formation of monopolies (which even conservative economists will agree destroy free markets).
Then have a decent tax rate on that economy and use that to fund strong social protections, including programs like basic income. That alone would eliminate the need for a lot of business regulation. There is no need to have a minimum wage or safety protections in the workplace when people can still live reasonably comfortably without a job. Employers who offer only a pittance won't be able to hire anybody, and if an employee walks into the workplace and sees frightening conditions, they'll just quit.
In such a system there would be plenty of risk-taking, and the wealthy will be able to earn great deals of money. They would of course then pay a large portion of that back in taxes. However, we won't begrudge them the odd private jet if everybody gets decent healthcare and a roof over their head.
The problem with the US is that our social programs are even weaker than in Europe, and so are worker protections. We have that strong economy as a result, but the money just goes into the hands of a few instead of benefitting the many.
Watching things like Cringeley's two series about the start of the computer revolution I cannot imagine something like that happening in Europe because the culture here is so different. Apart from a constant desire for stability there are still people walking around saying things like 'my grandfather was a miner, I'm a miner and, by God, my son will be a miner as well'. In America that would be replaced by 'my grandfather was a miner, I'm a mine superintendent and my son will own the mine'.
Now not to sound like a bat crazy right winger. Europe does tend to go a bit to far in being pro-worker, and anti-corporation. To a point where there is so much stuff that running a business is harder to do in that area. When companies expend they like to try to go to Europe, however they find the rules to be prohibitive, and prevents actually getting to the goals.
Now I am not say we should let the Corporations do what they want as that will only create more business, because that is false. There is a balance that is needed, where employee are treated and compensated fairly for their work and are able to thrive in their area of living, however the company needs the freedoms to take risks and run their business and trying different ways to run it.
This is shown by the weaker EU members during the last recession, they had too much entitlements that cost more then what would cover when things are not working well. The larger EU members were big enough to handle such entitlements but the smaller members cannot. The US during the same crisis got hit but recovered faster because of a more conservative approach towards entitlements. Granted the US is the biggest economy, however if implements EU style entitlements you will find many States will have massive economic problems. Much like how the EU nations had problems. Richer states, NY, California, Texas, Illinois may be able to weather the down times, but Vermont, or Kansas?
If something is so important that you feel the need to post it on the internet... It probably isn't that important.
If you want to start an IT business here in the EU, it is hart to get venture capital. It is easier to go to Silicon Valley and get money from European lenders than to do so on European soil. While the US has such a good reputation for being innovative they have an advantage in getting money. The labor regulations are not a problem, because they are mostly ruined in the last decade and they only come into effect when your company is larger and your people work for longer time.
As anti-business and anti-success as the American tax code is, the tax codes of most European countries, in general, are worse. When Hollande put France under a 75% top marginal income tax rate, even Sarkozy started making plans to leave the country. Think about that for a second. The ex-president was going to leave to avoid the taxes.
You're not going to lure top talent to your country to try and make a billion dollar business when you promise to tax most of their income at 75%. With proper planning, in the US you'll be paying about 50% tops in California, and 40% in some other states.
It's the only way to keep those pests at bay. If you give them a finger, they take an arm.
If you refer to Greece, you might notice that one of the core reasons they're in the slump is that they failed to grab corporations and shake their owed tax out of their pockets. If you look further for nations with an economy problem you'll see Italy, Ireland and some others, all of them either being very permissive and lenient when it comes to corporate behaviour or already pretty much owned by corporations because their governments were or are run by crooks that sold out.
The countries that are still doing ok are the ones where corporations lament how damaging consumer and worker protection laws are.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
There are many reasons but I think the best one is that there is a brain drain.
Why set up in Europe that doesn't have good laws and tax breaks for start ups anyway... when you can just move to the US and be surrounded by the best and the brightest from the whole world?
Its worse than the europeans realize because we've pretty much filled SV to capacity and now we're seeding Seattle with more of it and Austin, Dallas, a little in Los Angeles, and even something in Boston.
The US draws them in like a loadstone. The Euros are going to have to offer very attractive subsidies to keep those people in Europe. Think of the sort of pull Europe would have to have to start pulling American tech startups to Europe. That is how hard the US is pulling... If the Euros haven't noticed this then they're not paying attention. The US wants ALL your bright minds. All of them.
America is drinking your mental milkshake. *sluuuuuuuurp*
https://www.youtube.com/watch?...
I've decided to stop wasting my time responding to AC trolls/sockpuppets... so if you want a response from me... login.
Oh, you mean like Siemens, Philips, Ericsson, BAE Systems, STMicroelectronics, and Logitech? Or possibly much smaller ones like Raspberry Pi, Nginx, AVG Technologies and F-Secure?
Mostly, the big European technology companies actually make stuff.
"Stockholm is the home of billion dollar startups in Europe, and by one measure the Swedish capital is second only to Silicon Valley as the birthplace for the world's most successful internet companies." http://www.zdnet.com/article/s... On the other hand there is a lot of other cities that also makes the list. Like London and Helsinki among others.
This sort of comparison doesn't make all that much sense. First of all Europe isn't one country like the US. People in the comments here and in the New York Times article makes sweeping generalisations about tax rates, laws and regulations in Europe, when those differ substantially between countries. There is a lot of cherry picking here to make a point. Doing a startup or going a bankrupt isn't necessarily difficult all over Europe. I can only speak for Norway where I am from and starting a company here is not hard. I've done it at I have several friends who have done it. Some more successful than others and I've worked for multiple tech startups. Nobody here in their right mind would commit suicide over a failed startup.
I just wanted to mention these things because I think it is a tired accusation that Europe is failing in this area because it is not business friendly. That is frankly not the issue. The problem in Europe is that nobody has a 320 million market. Sure Europe is 500+ million people, but these are people in different countries with different regulations, cultures and languages. We have had a number of successful tech companies here in Norway but they don't show up on the radar because we are just 5 million people. E.g. we got a very successful company that does house listings, buying and selling, job adds etc. But such a company can't quickly expand. If they want to expand they need to learn about the laws and regulations of the next market. The jargon and language used etc. It is not easy. E.g. the way you describe house size in Norway is not the same as in the Netherlands.
A second major obstacle is that we don't have VC capital even remotely as accessible as in the US. That is simply a cultural thing. American's are of course much more risk taking than most other people on this planet. We also don't think as big as American's. We get content much more quickly. People are as mentioned also more loyal to their employers. You can't change that with business laws and regulation as that is part of the culture and it is not all exclusively bad. There is a flip side to everything. The US is a country which is poor at manufacturing while Germany and Japan excels at this. This is helped by a culture of loyalty which allows companies to spend a lot of money on investing in skills of employees without risking that their investment is lost because people suddenly leave for the competitor. As an employer you would not spend say 5 000 dollars a year on training if you could use that to increase the salary and steal skilled employees from somewhere else.
And thirdly while Europe isn't one homogenous mass that could be compared to the US, neither is the US really either. I'd go so far as to claim that Silicon valley is a west coast thing. Why is there no Silicon Valley on the east coast? Doing startups simply isn't such an honourably thing on the east coast. There is more status in being a big shot banker. In many ways the west coast of America has a unique culture created by all the luck seekers all the way back to the gold rush which can't be recreated easily elsewhere regardless of business regulation.
Trying to do this is really just stupid. Each country should find their own way. Denmark has a sort of food silicon valley. In Norway we have strong business clusters around oil technology on the west coast. Lots of different countries have different specialised clusters based on what they are good at. Replicating silicon valley when one already exists is a waste IMHO.
Europe does tend to go a bit to far in being pro-worker, and anti-corporation.
I do not think it is anti-business per se.
In one German book about business, in the basics, I have read that business is like a privilege bestowed for the benefit of the society. And imagine that: there were no mention of money nowhere near the definition.
In other words, it is not seen as a device for personal enrichment. And it is handled as such, at the very least, to cause no harm to people and society.
In the end, I do not see the lack of an overcrowded tech town as a shortcoming. If a packed tech community is your thing, then there are several cities with strong tech sector - Berlin, Munich, Frankfurt, Dresden, Nuremberg, etc, their satellites - which provide enough opportunities for businesses and workers.
All hope abandon ye who enter here.
look man, if parent post wasn't at least partially true, you wouldn't have things like SF residents up in arms over companies like Genentech or Google using private busing. There is a very very clear differentiation between the haves and have not's. Kind of a bad comparison *now*, but prior to becoming the 'rust belt', the northern Midwest produced 'things', as well as a huge middle class across multiple industries.
Tricking people into clicking on ads, or electronically stalking them not only fails to produce wealth outside of shareholders, but it has a negative social value as well. (though that's arguably just an opinion.)
Worker protection in the EU isn't the problem. There are all sorts of ways to go around the protections. If you had been in business here you would have noticed that. Outsourcing is one of the ways that "problem" gets worked around here. Worker protection for outsourced staff can be quite flimsy.
I would also say that bankruptcies actually happen quite a lot in the EU. What is much less common in the EU are successful restructurings or people who get back on business later and have success at it. Quite often it is legally easier to declare bankruptcy here than to restructure a company, especially if you have a large contingent of long term employees that would otherwise be hard to dismiss, while starting a new business after a failure can be quite problematic. Quite often in Europe people in the business know each other really well, it is a lot smaller, if people know you failed once they will be adverse to doing business with you again unless you provide extraordinary assurances that you probably wouldn't need in the USA. This is a cultural matter. I have noticed people in the USA usually keep to their own business and don't care much what happens around them but I can assure you the opposite is usually true in the EU. For good and bad.
The main issue in the EU is the lack of easy access to funding and the risk-adverseness of those with capital in Europe. They basically expect guaranteed returns on everything they fund. A lot of them got rich off the teat of the government or of government backed monopolies and are not interested in anything remotely competitive. So most innovation ends up happening with small enterprises people start on their own houses, much like in the USA I guess, the problem is then these small businesses cannot scale because there are no viable sources of funding to grow the business. So quite often either the business grows slowly and organically until it becomes massive (e.g. Ikea) or the founders just cash out on the business very early. But quite often the cash out isn't as gargantuan as what you see happening in the USA. It quite often ends up paying out like an order or two of magnitude less. If Facebook had been funded in the EU I bet if they did an IPO there people wouldn't have thrown them all that money just that. Then this money given to founders can be re-invested in new businesses. That's the main problem here. In Europe the founders never get quite enough to bankroll major new investments like what happens over there.
There are also infrastructure problems. The article talks about Silicon Valley. Well there aren't a lot of places where you can do silicon prototyping or manufacturing in the EU. There's Silicon Fen i.e. Cambridge the UK and Grenoble in France but little else. There are quite a lot of software hubs though. Like Silicon Glen in Scotland for games software, or Estonia (a place where Finnish investors usually go to because costs are cheaper and Internet access is fast) where Skype was located. etc.
Most of the "weaker" EU members during the last recession failed due to private banks failing and the state assuming their losses. Most of the talk about entitlements is pure bullshit.
Because we value our standard of health and living more than fat corporations.
Like most Americans you seem to focus only on wealth as a measure of success. Having been to Europe and America (but being a resident of neither), I much prefer the European model. Sure there's less raw cash, but since when did money buy Happiness?
Whenever there's those OECD comparisons about things that I value: happiness, standard of living, access to health and education, low violent crime etc then North Western Europe along with Australia and New Zealand blitz those things every time.
So if there's one thing Europe shouldn't be doing, it's being more like America.
Detroit is interesting because unions played a major part in destroying its car industry. At a time where US car companies badly needed to adapt to the new Asian competition, most of their money was spent paying for pension and benefits of people who had left the workforce years or even decades earlier. So they entered the death spiral of downsizing, outsourcing and such.
Same thing happens with civil servants and public workers in many cities in North America. Not only are the services severely downsized (such as in Chicago where they had to reduce the school calendar to be able to afford the gold-plated teachers conditions), but in many cases the cities have to spend tax money on pension and healthcare of retired employees who did not work harder than current ones, but simply happened to be in the workforce when the economy was booming and the unions had the cities by the balls. The result is that people who can't themselves afford a pension plan or decent healthcare and who will live in poverty when they retire have to pay for those lottery winners.
Another issue with unions is the lack of flexibility. They hold onto job descriptions to a point where it becomes totally absurd. Such as in the case of those people working in one of Warren Buffet's newspapers (I think the one in Buffalo); when the newspaper brought in a new machine to fold papers, they couldn't change the job of those poor union workers who used to fold newspapers manually. So until they retire, those people stand in line besides the conveyor belt where the newspapers exit the folding machine and in the air they make a move with their hand that is similar to what they used to do to fold the newspapers manually. They are known as "the blessers", and they are the perfect example of a situation where employees become wards of the company, not part of a team that is there to help the business.
lucm, indeed.