Europe’s AI gap reflects a deeper weakness in company building

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

1. 39:34

   What's your take on the kind of bigger geopolitical picture? Where should Europe be? There's a discussion about European sovereignty politically, but particularly also with regard to AI and the economy. the two big players are america and china uh basically in all areas not only with regard to ai one is a very autocratic authoritarian country the other one is a democratic country the authoritarian crunch is pretty perfect the democratic country is pretty imperfect so 10 years down the road who is going to win that race not only the arms race in AI but in the broader context also the race of systems and where should Europe be?

2. 40:31

   Neutral? China's side as a colony or a reliable ally of America? I think it would be best for Europe to be a reliable ally I always want to push back very hard on these sort of ways that this often gets framed as a sort of moral equivalence between the U.S. and China. I always find that very, very offensive. But let me make a slightly different point. I think from an American perspective, more important than whether Europe is a super close ally or, I don't know, a somewhat allied but very independent thinking place is it's in America's interest for Europe to get its act together and for Europe to be more functional against the economy going.

3. 41:33

   To be a part of building the future. And then the question is how to do that. There are probably, in various sectors, if Europe can build up its own industry or it can even become a world-leading industry in some things, that would be very good. If it's further behind, then probably you should find ways to work with America much more closely. So let me concretize with, you know, I don't know, there was this, in the late 60s, you had the Concorde program, which was sort of a British, French, you know, not exactly free market plan.

4. 42:19

   You know, supersonic aviation started in the U.S. with Chuck Yeager breaking the sound barrier in 1947, but Europe was behind, but you could get your act together and you could catch up and overtake the U.S. And, you know, the supersonic aviation industry, you know, was a European leading industry. And so that's not a free market thing, but that's something that I think the U.S. should be fine with, supportive of. That was Europe doing something.

5. 42:49

   And then on the other hand, you had something like the French Minitel program of the 1990s, where the internet was supposed to be French. And it ended up, you were behind and you just dug yourself into a deeper and deeper ditch. And so if you ask the question about AI in 2026, is it like the Concorde or is it like Minitel? And if we were honest, my assessment is that Europe's further behind than Minitel was.

6. 43:25

   Unfortunately, I agree. The question is, why is that? And how likely is it that we can change it? What is your analysis? Why is it? And do you have any ideas what Europe, what Germany should do in order to get back to the map and get its act together? The why questions are always over-determined and much harder to answer. But let me, on a very, you know, one of the things in Germany that people always talk about in this entrepreneurship context is that there's a fear of failure, that people are too risk-averse and things like that.

7. 44:11

   And then the, and maybe that's true, but the dimension I want to always push back on is perhaps there's also a fear of success. That if you have something that works, you're not going to, you know, you're not going to scale it to this extreme degree like an Elon Musk or Mark Zuckerberg. And, you know, at some point you'll sell the company or you'll exit or something like that. And so what's very striking is how few great new companies have been built in Germany in the last number of decades.

8. 44:51

   Here's a stat that I looked up, and this is, again, it's one particular dimension to look at. But if you look at the 50 wealthiest people in the U.S., and most of this money comes from particular companies, only 12 are Gen X or younger, people born in 1965 or later. So it's also pretty much dominated by old people who have had more time to compound their wealth. Germany, it's actually more distributed.

9. 45:18

   There are 20 of the 50 people are Gen X or younger of the 50 wealthiest people in Germany. But here's the difference. In the U.S., nine out of 12 of those people made their own money. In Germany, all 20 of those 20 inherited it. Not a single person did something new, made some new money, built a large, new, scalable company. And then, of course, I'm just looking at this very extreme, but for each of those people, they created thousands of, I don't know, millionaires in their companies, tens of thousands of other jobs.

10. 45:54

    They added to the economy in lots of different ways. And there used to be this ability in Germany to build great new business. There was the Mittelstand. There were also much larger companies that got built in the late 19th, early 20th, even after 1945 period. And then it's really something about that has really broken down since 1995. I don't have an answer to that, but that would be the kind of question I would try to think about really hard.