I am Hungarian and I remember that when
I grew up I was surrounded by tech from
European companies there were phones
from Finnish Nokia from German Siemens
from French Alcatel from Swedish
Ericsson there were TVs from Dutch
Philips and just much much more but now
in 2017 most of that seems to be gone so
where did all the European tech
companies go well I'm Martin from
Toccata you're watching the 24th episode
of the story behind series and let's
find out what I had this thought my
first question was whether there really
is a tech deficit in Europe or if it's
just my brain making it up so I started
searching and I limited my search for
the sake of brevity the only consumer
facing technologies so smart phones and
all search engines yes industrial
automation and accounting software not
so much and here's what I found
consumer electronics hardware companies
are basically non-existent in Europe
there are zero major European companies
making pcs or gaming consoles and things
aren't much better for smartphones
either there is hmd making Nokia phones
again and a few niche brands exist as
well but all those combined don't sell
as many phones as a b-grade Chinese
phone brand alone since Philips sold off
its TV business Europe also has no
mainstream TV or monitor brands left
either audio Hardware seems to be doing
a little better with a few major brands
like German Sennheiser still left but
here two European brands are vastly
outnumbered and many like Austrian AKG
are being sold off to outside
competitors the camera market remains
dominated by Japanese and American
companies and Europe is barely even in
the race with new hardware categories
like smartwatches VR and AR hardware or
consumer drones and even on the
component level there are close to no
European companies at all so while there
are a few European success stories I
think it is safe to say that in all the
major categories European consumer
electronics hardware companies are far
far far
and their competitors from the US or
Asia outside a situation is somewhat
better with software and online services
though there's a big problem here as
well I think it helps to break this
category down into three layers
infrastructure platforms and end
consumer applications infrastructure is
the backbone of the internet and it
includes everything from cloud computing
to content distribution networks and
even domain name services and there are
no European companies here that reach a
global scale obviously geographical
distances mean that I don't know
local hosting companies exist everywhere
but American companies dominate on the
global level with potential competitors
only really emerging from China not from
Europe and that's mostly because China
is basically an impenetrable bubble I've
made a separate video about the Chinese
bubble that you can watch right here the
platform layer consists of software that
enables other software and services to
run and all include things like
operating systems web browsers app
stores search engines and even social
media networks here if you want to build
an app you have to deliver them through
these platforms and once again US
companies dominate the industry here
there is not a single major European
platform in any of these categories and
the only potential challenges once again
come from China in the end-user
application layer you know the stuff
that runs on top of these other two
layers European companies have actually
managed to build quite a few successful
products here are just a few that come
to my mind and while that is genuinely
great there is a catch here as well
scale all of these European success
stories come from companies that develop
either a single product or very few of
them they are specialists in the
meanwhile in the US and China on top of
these specialists there are also five
plus three companies that I'll just call
general purpose tech giants companies to
just do thousands of things at once and
buy up hundreds of startups a year
Europe has zero companies like that
so Europe has a lot of little fish but -
no big fish in summary Europe is it
barely involved with the infrastructure
or the platform's layer of software and
services and while it does have some
success stories with end-user stuff it
lacks the old
tech giant's so the tech deficit is real
but why why don't you peens just build
more successful tech companies
I think this breakdown actually explains
a lot this layer the consumer facing
layer is the only one at which Europe
seems to be well at least moderately
successful what's different about it
compared to the others is that quite
frankly this room for thousands if not
tens of thousands of companies here the
more apps and games the merrier
anyone with a good idea and a few smart
people can sort of create a cool app
from their dorm room regardless of
whether these developers come from
Europe or the US or India or wherever
with platforms and infrastructure though
there's just much less room and with it
less diversity the world will really
only adopt a few operating systems of
few search engines a few global cloud
computing platforms and so on everything
happens at a much much larger scale with
tens of thousands of employees per
platform suddenly having a good idea and
a bunch of smart people doesn't get
companies anywhere they also need to the
right macroeconomic environment lots of
investors who are willing to give them
money relaxed taxation and privacy laws
and endless pool of highly educated
people that they can hire and fire as
efficiently as possible and so on and
this is the key problem I think Europe
is falling behind with a few of these
there are educated and entrepreneurial
people with great ideas who can build
great things the ank you survey er
proves that but this just isn't enough
to reach the heights of Google and Co so
I think there are five main reasons for
this lack of competitiveness regulation
investment climate geography and
demographics the attitudes of common
European citizens towards technology and
the lack of strong startup ecosystems
and of course I'll have to generalize a
lot because of course these metrics vary
quite a bit across Europe still starting
with the first one it is fairly safe to
say that European legislation especially
when compared to that of the US or say
China isn't ideal for tech companies
taxes are high which is a straight
competitive disadvantage labor laws are
probably districtís in the world making
it hard for companies to
fire and fire people which is especially
difficult for tech companies where
fluctuations are huge and companies
would have to hire and fire all the time
to adapt to the rapidly changing
environments privacy laws are some of
the strictest in the world to companies
like Google or Facebook whose core
businesses together every click and
every scroll of their users are
constantly fighting European legislators
even now and having a European company
do this on the same scale would be
difficult to say the least and lastly
there's also a lot of consumer
protection regulation and red tape so
companies spend a ton of resources on
compliance instead of spending it on
beating competitors the Investor climate
in Europe is also behind that of the US
and China which is especially important
for startups it's harder for European
startups to raise money especially once
they grow a little larger as an example
Fortune found that in 2015 European tech
startups were funded at the lower
revenue multiple of 2.6 versus 3.9 on
the US side
so in general money is tighter and then
there's simple geography launching
global services just makes more sense in
large homogenous markets like the US or
China first where an application can
reach scale very quickly doing so in
Europe would require adapting the
product to 30 languages legal systems
and cultures right away just imagine if
a voice assistant like Alexa launched in
Europe first that just wouldn't make any
sense and then there's also something
much more subtle I can't really quantify
this but Europeans in general just tend
to be really pessimistic about both
technology and business that's why bleh
brand privacy laws are so strict when I
had lived and worked in China I was
constantly surprised by how most people
I met there were genuinely excited that
new tech companies would solve their
problems because here in Europe most
people I know think of tech companies as
the cause for most of our problems not
the solution to them and this attitude
makes the adoption of new technologies
way slower here than in much of the rest
of the world now my last reason would be
the lack of strong existing startup
it turns out that exposing people to
existing and thriving ecosystems like
Silicon Valley and Shenzhen just
organically gets them to build new
startups and as Europe was a little
slower at the dumping of tech trends and
as it is very decentralized there just
aren't any Silicon Valley or Shenzhen
size startup hubs anywhere in Europe yet
it's a chicken and an egg problem the
more tech just creates more tech and
less tech creates less tech anyway I
think those five reasons combined
explain why there are no global tech
giants here in Europe it's just harder
to finance harder to hire and fire
people and harder to reach people at
scale here in Europe which means that we
can build specialists but not all round
tech giants yet and the lack of
homegrown Giants also has a pretty major
side effect new technologies that are
pioneered by specialists often end up
being acquired by the Giants in start-up
terms this is called an exit and most
founders and investors love exits
because it means that they can finally
cash in on their investments problem is
Europe doesn't have any Giants so most
European exits are going to non European
Giants exits in Europe are a constant
brain drain and that's kind of my
conclusion I think tech is often
struggling to grow really big in Europe
and when it does it often gets acquired
by foreign giants now I know I have so
far sound that's pretty gloomy but
there's another way to look at this
whole situation as well a lot of what's
bad for companies can be good for people
I mean there are tons of benefits to
being a European citizen again this is a
generalization but Europeans tend to
have longer holidays I have 27 days here
in Berlin for example and I only had
five when I worked in China bles income
inequality according to Wikipedia and
yes I am quoting them deal with it
Europe is about as equalitarian as it
gets
better unemployment benefits if it ever
comes to that relatively cheap universal
health care high quality education that
is free or at least much cheaper than
whatever is available in the u.s.
especially great and usually cheap
public transportation better privacy
stronger consumer protections a
protected environment and so on so
whether you think these things are
ultimately worth not having an ultra
competitive tech environment for will
ultimately depend on your priorities in
either case I think it's important to
know what the trade-offs are that we are
making anyway
I'd like to hear why you think Europe
has lost its lead in technology I've
actually put together a poll over at
Twitter you can find it in the
description of this video so make sure
you go there you cast your vote too and
while you're at it make sure to follow
me on my social media channels if you
want to see more videos like this one
from the story behind series then be
sure to subscribe to me on youtube and
also watch my previous episodes because
they're all still relevant all right
I'll see you in the next one bye