Is Europe sleepwalking into tech irrelevance?

Is Europe sleepwalking into tech irrelevance?

It’s become cliché to talk about inventions that can ‘change the world’, but when it comes to transversal technologies – cross-cutting tools with the potential to transform multiple industries – the moniker feels like an understatement, writes Andrew Chakhoyan.

Andrew Chakhoyan is Senior Manager at Booking.com  

The good news is that this disruptive, productivity-boosting kind of tech is the best hope humanity has to address our most daunting challenges, be it the threat of a next pandemic or the warming climate, the labour shortages, or clean water and sanitation.

The bad news is that since 2015, we implemented a mere 12% of sustainable development goals (SDGs), having passed the halfway point to 2030. It’s difficult to imagine how we can accelerate advancement towards humanity’s shared objectives sevenfold without major technological breakthroughs in applied AI, cleantech, new materials, or next-generation computing. The bigger question still is how we assure a safe and timely worldwide adoption at a required scale.

Europe is falling behind

Across a wide range of rankings and indexers, Europe has a lot to be proud of. We outcompete the world in human development, social progress, genuine progress, and work-life balance. The EU boasts the world’s most decarbonised economy.

While impressive, those indicators don’t address the longevity and durability of European economic competitiveness and its derivatives we enjoy – be it quality of life or climate leadership.

A groundbreaking study by McKinsey contends that at this point, much, if not everything, hinges on transversal tech ascendancy, and Europe’s scorecard is somewhere in between unacceptable and dismal. We are talking about 30-70% of Europe’s forecasted growth by 2040 or €2-4 trillion annually of corporate value-added that Europe might fail to create. That’s what McKinsey believes is at stake.

Startups are starting up

It is encouraging to see our startup ecosystem flourish. In 2021, Europe attracted more venture capital than China and saw the largest surge in unicorns since 2014.

Between 2020 and 2021, startup funding more than doubled. In fact, the €88 billion raised that year nearly matched the three preceding years combined. The number of deals, too, is following a steady upward trajectory.

But that’s only half the story

The innovative competitiveness of an economy is often conflated and confused with a healthy startup ecosystem. That is a mistake. The latter is a necessary but insufficient condition for transformative tech to emerge and scale. Ideas are a dime a dozen; the real challenge is execution on a global scale.

And that’s where Europe’s underperformance is worryingly high. In 2000, large European firms were valued on par with their US peers ($7 trillion versus $8 trillion). By 2021, however, the ratio was 2-to-1 in the US favour ($46 trillion versus $21 trillion). Large European firms are adopting AI at half the speed of their Chinese counterparts. It’s the same story for quantum computing: none of the world’s top 10 companies are headquartered in Europe, and public funding is only half that of China.

Large global European firms are growing 40% more slowly than their US counterparts. They’re investing 40% less in R&D and are now 20% less profitable.

Putting stock market valuations or corporate profits aside, this sluggishness in developing transversal technologies slows progress towards decarbonisation, and could thwart von der Leyen Commission’s signature policy – A European Green Deal.

The regulation does not beget competitiveness

The global competitiveness of European tech companies is also a question of value compatibility on sensitive topics such as privacy, social impact, and fairness. When foreign companies operate in the European markets, the alignment is ensured through regulation – be it GDPR or the AI Act.

What’s missing are major enterprises with European values in their DNAs in the trillion-dollar club, who’d lead by example, compete on a global scale, and thus proactively propagate our continent’s interpretation of Tech4Good.

To compete in the big leagues, you need the players

To have global relevance in the age of AI, a tech enterprise needs a global scale. As ChatGPT put it to me: “Algorithmic elegance without data is like an F1 car without fuel.”

And that brings me to a European tech champion I know well – Booking.com. For years, we’ve invested significant resources in AI development, with around 400 employees working on AI-related projects – software engineers and data scientists – primarily at our headquarters in Amsterdam.

We collaborate with local colleges to keep current with the latest AI research and, in 2021, launched Mercury Machine Learning Lab in partnership with the University of Amsterdam and the Delft University of Technology.

The troves of data we’ve collected over the years in the low-risk space – matching travel demand with supply – could help train new AI models in Europe, be it in cancer research or green energy.

AlphaFold is often the first case techno-optimists cite; it predicts 3D models of protein structures and speeds up research in nearly every field of biology. But where did it come from? Well, this algorithm is a direct descendent of AlphaGo – an AI model trained to play a board game.

This is but one example of cross-pollination, or, shall we say, technological transversiveness. While Europe’s track record of supporting startups is commendable, it’s time to shed the suspicion of big tech.

The ultimate goal is a competitive, mixed economy, strong enough to avoid the slow-motion corporate and tech crisis McKinsey has warned us about. The First Industrial Revolution was born in Europe, and now we must find a way to compete in the Fourth.

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