EU Signs €145B Declaration to Develop Next Gen Processors and 2nm Technology

Here's a story. I was once visiting Silicon Valley for work and getting dinner with a friend who lives there. I'm a Brit who lives in central Europe. On the way over I'd bought a copy of Der Spiegel, which likes to write tabloid-esque articles about the Power Of Tech Firms. The front cover this particular week was one such article and I had found it kind of funny, so I was showing it to my friend and we were discussing it.

Next to us in the restaurant was another table with an elderly gentlemen dining alone. Suddenly he leaned over and joined our conversation. It turned out he was some sort of economics academic and one of his 'research interests' was this question of why the EU doesn't generate tech firms. He had a lot of insight and I've never forgotten that discussion: it has influenced my thoughts about how to set up my own software firm.

One of the points he made is that outside the USA there's no real culture of granting early employees equity, whereas in the US tech industry that's standard. ARM is apparently one of the few exceptions, in which the co-founders did in fact hand out equity early on. The incentivising effect this produces is profound. I've felt it myself - when I joined a startup, having an ownership stake as well as a salary made the difference between doing the work, and genuinely caring about the company, being willing to get into arguments and fight for what was important, etc. So a culture gap with respect to ownership is perhaps one reason.

The man made other points that were more commonly observed, like the different approaches to regulation. A few days ago people were surprised to discover that the UK/EU Brexit treaty mandates SHA-1 for some obscure data interchange format. This is typical for the EU. In the US people at least pretend to care about the innovation-harming impact of regulation, even on the left. There's zero culture of that in the EU. The EU views more regulation as inherently good, and anything that isn't caked in hundreds of pages of regulations as being merely on the TODO list. It also brooks no dissent: one of the EU's "red lines" in the negotiations was that they didn't want the UK to undercut their "standards", defined as regulation. Any country that attempts to deregulate gets taken to court by the EU Commission itself, in its own courts, which almost always rule in favour of the Commission regardless of what the law actually says. This creates a one-way ratchet of ever more convoluted and obsolete rules, which in turn imposes a thicket of complexity costs on companies that have other things to focus on. Many of these rules are justified on the grounds of making trade easier but often have the opposite effect.

Finally there are the very real cultural aspects. The US/Valley culture practically celebrates failure. This isn't necessarily good - failure is still failure, but family and friends at least seem to be pretty supportive of entrepreneurs in general and "failure" is very flexibly defined. For instance creating a company that never makes money isn't a problem in the US thanks to a mix of this culture and bottomless VC money. Whereas that would be perceived as failure by family and friends in Europe.

However, not in the EU. The EU has been engaging in massive subsidisation for decades and has little to show for it. In some places it seems to have led to a hollowed out society in which companies that are supposedly startups spend all their time chasing grant money instead of building real products.

VC investment is hard work. The EU isn't a well run VC firm even though it deploys more capital than such firms do, and it shows: they don't really care what the money gets spent on as long as there's a paper trail they can use to do ass-covering if it turns out the money was lost to fraud. So it creates this USSR-like culture of zombie firms that can't really survive independent of state funding.

Important defined how?

The car wasn't. The mobile phone wasn't. Computers in their post-WW2 form basically weren't, for the last half decade if not more it's all been private sector. Yes, DARPA did some very early work on packet switching networks and their work became widely adopted mostly because it was free: nice. But the moment these inventions started to matter, all R&D was taken over by the private sector.

Governments spray so much money at things that I'm sure for almost any broad category of thing, you can find something they funded. But that's no evidence that stuff would never have been researched anyway, given the enormous and long term R&D efforts routinely mounted by non governmental entities. Look at AI: government funded institutions are constantly lagging behind.

It sucks a bit that it's this way but if you are profit driven, you can't gamble 140 billion of your own money in hopes of developing new tech.

Alphabet alone spends something like $21 billion on R&D per year. It doesn't take many years of that to reach $140 billion, and Alphabet is not the only company doing basic research.

Having spent many years reading research papers coming out of both academia and industry, my conclusion has been that the best papers are always those with corporate funding - some academic teams receive partly corporate funding and these tend to be in the middle, pure corporate labs tend to do the most exciting work. The bureaucrat-distributed money often gets allocated for decades to intellectual dead ends nobody cares about, purely through inertia and lack of institutional incentives to maximise ROI.