Is it only me or has the phrase US innovates, China replicates, Europe regulates become increasingly popular? In any case, it smells like a myth. Let’s dissect it.

The narrative that only America can invent great tech companies is familiar. It’s convenient for anyone who wants to argue that things like competition, copyright, governance and responsibility stand in the way of innovation. For sure, that is a very one-sided view of innovation. Why worry about disruption of local economies? Democratic elections? Fair competition? If innovation equals techno-capitalism, the first part of the line is true.

China replicates – this one is probably true too. I’m no expert on China, but I have visited the country several times. On a shallow level, China copies a lot of brand fashion for example. On a deeper level, it puts a lot of renminbi into buzzword technologies like AI, quantum computing, future materials and such. But it’s TikTok that is China’s biggest tech hit, not necessarily a product of all that investment. Is TikTok replication of US social media? On some levels yes: it builds on user-created material and a compelling algorithm, just like YouTube or Twitch or Facebook Reels. The business model is based on harvesting user data, just like some of the Silicon Valley skyscrapers’ (except not only to share with advertisers and the NSA…). It is also fair to say that the success of TikTok is credit to re-interpretation and re-invention of this formula. Just like Snapchat or Instagram or Reddit or a long list of US tech hits. China replicates. And it re-invents. Just like the US.

Europe regulates – hehe… hard to argue with that one. The European legislator brags about having the world’s first ever AI regulation. And it is proud of its GDPR export. (Does GDPR export add to GDP? Sorry, pun intended.) But… as if China does not regulate? The Chinese government owns golden shares in the biggest tech companies. It has the Great Firewall and Sesame Social Credit. More regulation than any eurocrat would ever wish for. More importantly, US regulates too. In fact, Silicon Valley’s success relies on regulation, not least the notorious Article 230 of the Communications Decency Act – which has very little to do with decency, but grants technology providers immunity from liability for crime and violations by their users. That’s not all, where do the famous investment bankers on Palo Alto’s Sand Hill Road get the money from? Successful entrepreneurs? “High net-worths”? No, it’s public money. The federal loan guarantee programs going back to the 1950’s give four public dollars for every private. The investment bankers used this policy dating back to president Eisenhower to full effect.

So everybody regulates, but Europe creates. We may not have the huge consumer markets, internet platforms and public funding systems of the East and the West. But Europe has hundreds of thousands of creative business of all sizes building on what we like to think of as European fortés: pluralism, expression, quality.

In digital, if China is the child trying to find its way and US is the disruptive teen who wants to move fast and break things. Does that make Europe the parent?

Netopia turned to artificial intelligence for guidance in this European election.

We put the election manifestos of the main party groups into a large language model and asked it to analyse the digital policies. Read the result here: LLM analysis of key party manifestos – EU Elections 2024 – Netopia Netopia

Oh, and here is an infographic based on language analysis of the election manifestos. Looks like blocs don’t care about copyright… (at least ot in this election). Digital Policy Topics in EU Election – Netopia Netopia

But enough about the real policy-makers, what would AI do? We interviewed three LLMs about their views on digital policies: Vote AI in EU Election? – Netopia Netopia

Would you vote for a machine? In this election you can’t, maybe in the next? In any case, don’t forget to vote!

The digital economy runs on optimism and expectation. Tech startups don’t make money as long as the scale. Big tech shares are measured with a different yardstick than other businesses. Employees many times make more money from stock options than wages. And whatever short-term problems (“disruption”) it brings is always compensated by big promises (“opportunities”) for the future. But is the hype machine running out of steam?

We’ve had a steady influx of hype for decades. Web 2.0. Smart phones. Big Data. 5G. Smart watches. Blockchain. Web 3. Metaverse. AI. Each of them sparkling with new possibilities, attracting capital private and public, disrupting existing economies and attracting “early-adopters”. Never mind the actual contribution to economy or jobs, get in ahead of the curve and you can make big bucks.

The unusual decade of negative interest and quantitive easings (=printing money) by central banks has been a perfect driver of this economy. If you lose money by keeping it, invest it anywhere. Facebook for pets? Let’s do it! Micromobility app scooters? Bring it! As long as new investors come in after, you can make a nice exit.

Of course now the macro-economy has changed. The era of free money is over. Share-holders ask for profitability over growth. So that is one problem. But is there a bigger problem? What if innovation is dead?

I used to be able to see what was coming around the corner. Spot the next hype from a distance. So perhaps I lost the touch. But I have no idea what comes after AI. Far-future technologies like DNA data storage and quantum computing are decades away. Sure, digital twins and 6G mobile connectivity, but the use cases are more for business-to-business than consumer facing value chain upsetters.

Maybe I’m just out of touch. Or maybe there is a new hype arriving any moment. But it could also be that there is no new great hype any time soon. I am concerned for the big tech barons. Surely the era of digital feudalism cannot be over…

Everybody’s talking about Dune II, Netopia also wants to be in the club! We don’t review movies, but there is a copyright angle here – and not one you might expect. Here goes:

I have done a fair share of lecturing to students, mainly in games. Some of them want to start businesses and want to talk about how to protect their ideas. Except ideas don’t have any legal protection, it is the end result – the work – that can be legally protected. Actually, ideas have little or no value, it is only when you realize that idea into something that other people can enjoy or use that they get value. The more work you put into the idea, the more the value grows. Of course, a good idea is a great motivation for that work. (But the process tends to change the idea on the way, hence the concept “kill your darlings”). But I digress, the challenge is to explain this to the students without killing their enthusiasm. Enter: Frank Herbert.

Frank Herbert was of course the author of the Dune-books. The first movie was made in the 80’s by David Lynch and before the new movies came out, I used to illustrate this with an image of the star Sting in space swimtrunks. There is a story about how Frank Herbert when he did book signings often met fans who had the same brilliant proposal:

I love your books. I have a great idea for the next Dune-book. How about I tell you the idea, you write the book and we split the money?

There is a particular flavour of European techno-nostalgia. It says something like: We used to be the leaders. We used to be inventors. We used to make the fastest trains, the fastest planes and the fastest cars (well, that may still be the case). We used to be drivers of new technologies: telecom, microchips, and energy. But today, Europe asks itself: “What happened? Where are the European ‘digital champions’? Why has Europe not produced an Amazon or a Tiktok?” (Next instant, somebody says “Spotify!” and then what?).

These phantom pains may be the reason why there are so many EU policy and funding initiatives aiming to bring forth a European digital champion to rival those of California and China. The idea is that public support will bring competitive companies. That has worked really well for Silicon Valley and Shenzhen. The famous tech funds on Sand Hill Road are built on public funding in the form of federal loan guarantees of four public dollars for one private. 4:1. One detail: the US Small Business Investment Act dates back to 1958, giving America many decades head start. In China, the five year-plans provide ample funding for various technology industries. So plenty of public money to the West and to the East.

Can Europe catch up by pouring public money into digital start-ups? Could that bring the European digital champions we yearn for? (If you think those looks like rhetorical questions, it is because they are!) The answer lies in how the tech startup system works and the keyword here is “exit”. Let me try to make sense of it:

Digital entrepreneurs are not expected to make any money, they are expected to “scale.”. Investors don’t care about the profits of the company, they have a longer view of value. Of course, the company still has costs, but those are covered by the investors. There is a system of “rounds” called things like pre-seed, seed, series A, B, C etc. Each step of the way, investors get shares of the company, and what they pay for those shares determines the valuation.

If you pay one Million US-dollars for 10% of the shares in a “series A-round”, the startup is valued at ten Million. If, in the “Series B-round,” the next investor buys 5% of the shares for two Million USD, the startup is valued at 40 million, and the first investors shares have quadrupled in value.

The risk is considered to be lower in later rounds, so earlier investors get more shares for the same money. Note that this can go on for several rounds, with the startup operating at a loss. So… now you probably ask “how do investors get their money back?”. The answer is the magic word “exit”. Normally, this could be different things, for example, offering the company’s shares on the stock exchange or selling to a bigger company or investor. But for tech startup investors, the end goal is (almost) always the same. Exit by selling the shares to an internet skyscraper. Amazon, Apple, Google, Meta… the usual suspects. Those mammoths know how to make money from users, the investors cash out and move on to the next case. Happy end for all involved. (This system used to work much better in a low-interest rate economy, but the exit-principle is the same).

This means no amount of EU startup-funding will bring European champions: as long as the end goal is exit to Big Tech, all that tax-payer money only serves to reinforce the incumbents.

“Digitalization brings fantastic opportunities” – ever hear that line? I’ve heard it a lot, in particular from people in public office (=politicians) and civil servants (=bureaucrats). One time, I found myself in a seminar with six(!) directors of different public agencies. Each of them opened their talk with some variation of the phrase. It was like catechism. Before we can say anything else, we must first pledge allegiance to the digital revolution. (Fifteen years before the line used to be “The internet brings fantastic opportunities”, perhaps progress can be defined as replacing one word with another?)

Opportunities. Sounds great, doesn’t it? But… is really opportunities you want? So many opportunities, so little time. Maybe if you’re looking to change jobs or move house, opportunities can be great – but even then, too many opportunities can be overwhelming. For most parts, perhaps other things are more important? Quality, delivery, reliability, cost, availability, simplicity… (I’m sure you can think of more words!). Of course, opportunities – used properly – can bring all those great things. An opportunity is an unfulfilled promise. It demands of you to pursue it. But what you really want is results. Your time is limited. Your money is limited. You don’t want more opportunities, what you really want is better results.

Have you bought or received any device lately? Any new software or digital service? Does your phone have four different calendars, each of which sends you reminders for an appointment that was cancelled two days ago? In software development, there is a phenomenon called “feature creep”. It means adding new features, not because we need them but because we can. It can be very difficult to resist new features. What if your toothbrush had an app that helped you keep track of your brushing habits? Oh, wait – that already exists! It is easy to make a case for more features and difficult to say no to them. If you’re already making a photo indexing software, you might as well add a timeline and once that is there you can always add appointments and reminders and an AI tool that trawls your phone and cloud services for other appointments and just like that… you have a fifth calendar sending you reminders about birthdays of people you haven’t met in a decade. Digital opportunity and feature creep are siblings. They make each other stronger and makes it harder to break the pattern.

I don’t know the answer, but I do know that we are fast approaching the point where our digital assistants create more work than they take away. Perhaps we are already past that point. Opportunity brought us here. I have one idea for a different way, though. Bear with me.

We have all heard the stories of how Japanese trains are always on time. If the Shinkansen is 30 seconds late, the director of the train company makes a public apology. It is tempting to think that this punctuality is thanks to superior technology, perhaps a super-computer looking after all trains or some kind of electronic miracle device in each locomotive. Japan is the birthplace of GameBoy and micro-computer powered rice cookers, after all. But no. The opposite is the reason. By carefully eliminating every potential source of delay, the risks are mitigated. If a railroad switch can be removed, that is one less potential malfunction. If a road-crossing can be re-designed from gates to a bridge or tunnel, that takes away one potential source of disruption. Not by looking for opportunity, but by removing it, the Japanese railway system works better than perhaps any other in the world.

Back to the civil servants and elected decision-makers. If they focus their resources on opportunities, there will be more. Lots of great potential. But when is the time to focus on results? How to best spend the public funds? How to get the most delivery for the investment. The case can always be made for opportunity. But now may be the time for simplicity rather than opportunity. Less, not more. Can we be inspired by the Japanese train philosophy? Or would you rather have seven… no eight… no eighteen reminders for that meeting that you cancelled?