Slashdot Mirror
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.
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.
"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.
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.