I’ve been thinking a lot about how the current Administration is waging war on U.S. science/scientists, and how other countries are hoping to benefit from a U.S. brain drain. But two articles in today’s Wall Street Journal reminded me that attracting talent is only part of what must happen for science, technology, and innovation to flourish. Getting the talent is, in some ways, the easy part; getting the most out of that talent is the tricky part.
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If only creating innovation hubs was that easy. Credit: Microsoft Designer |
The first article, by Tom Fairless and David Luhnow, is about the European tech industry, and they pull no punches in their opening sentence: “The world’s technology revolution is leaving Europe behind.”
Europe,
they point out, actually has more people than the U.S., a large economy, and a
well educated work force. It is home to some of the best universities in the
world. It even has some strong history in tech, including Nokia, ASML, Spotify,
and Klarna.
But, they
point out, only 4 of the world’s top tech companies are European, and they cite
calculations from Andrew McAfee, a principal research scientist at the MIT
Sloan School of Management: “Over the past 50 years, the U.S. has created, from
scratch, 241 companies with a market capitalization of more than $10 billion,
while Europe has created just 14.”
Umm…
The authors say:
Europe lacks any homegrown alternatives to the likes of Google, Amazon or Meta. Apple’s market value is bigger than the entire German stock market. The continent’s inability to create more big technology firms is seen as one of its biggest challenges and is a major reason why its economies are stagnating. The issue is even more urgent with the prospect of higher tariffs threatening to further curb economic growth.
Investors and entrepreneurs say obstacles to tech growth are deeply entrenched: a timid and risk-averse business culture, strict labor laws, suffocating regulations, a smaller pool of venture capital and lackluster economic and demographic growth.
As a
result, they speculate: “Having largely missed out on the first digital
revolution, Europe seems poised to miss out on the next wave, too.” They
mention how Mario Draghi, the former European Central Bank president, wrote in
a report last fall: “The EU is weak in the emerging technologies that will
drive future growth.” As evidence, they note: “None of the top 10
companies investing in quantum computing are in Europe.”
Their
diagnosis of the problem: “A big reason why Europe is now behind can be summed
up as a lack of speed. Entrepreneurs complain that everything takes longer in
Europe: raising money, complying with local regulations, and hiring and firing
workers.”
“What is
different in America is the speed of almost everything,” Fabrizio Capobianco, a
tech entrepreneur from Italy, told them. “Americans make decisions very fast.
Europeans need to talk to everybody—it takes months.”
The EU has
been more proactive than the U.S. on important 21st century issues
like privacy and AI
regulation, but this is both a blessing and a curse. Protecting the public
and workers fits the European social contract, but can have adverse impacts on
businesses’ abilities to take chances. U.S. companies complain about our federal
and state regulation, but often find that doing business in Europe is even
harder.
The
authors mention Bird, a messaging start-up from the Netherlands, that is moving
its main operations out of Europe. “Stop regulating, Europe. We might be the
first, but we won’t be the last (to leave),” Robert Vis, the company’s
founder, wrote.
The authors
close with another quote from Professor McAfee about the Dragi report, which
called for more government investment in tech, not for finding more ways to attract
private capital. “That’s when I went from nodding my head in agreement to
banging it on the table.”
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The second
article was on, of all places, Austin. Austin, the darling of so many people,
for so many reasons. Its slogan is “Keep Austin Weird!” It has a very non-Texas
laid-back vibe. Such a distinct music scene! And it’s not Dallas or Houston!
A few
years ago, especially at the worst of the pandemic, Austin seemed fated to be a
new tech center. People were fleeing Silicon Valley and San Francisco in
particular: too expensive, the quality of life had suffered, and remote work
was in. Austin seemed like a great alternative.
That, according to WSJ reporter Isabelle Bousquette, may be ending. She reports:
A new report from venture-capital firm SignalFire shows that in 2024 Big Tech employment declined 1.6% in Austin, and startup employment fell 4.9%. Tech employment in Dallas and Houston also declined, along with cities like Denver and Toronto. Tech employment grew, on the other hand, in New York and San Francisco.
“I think
that promise was never realized,” said Asher Bantock, SignalFire’s head of
research. “This idea that it would become a new startup hub didn’t
materialize.” The SignalFire report also showed that Big Tech employment in San
Francisco rose 1.8% during the same time period, and start-up employment went
up 0.8%.
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Credit: SignalFire State of Tech Talent Report 2025 |
That’s not
what we’re used to hearing about Austin.
You may
remember – I did not – that part of the 2022 CHIPS Act was for Regional Tech
Hubs. The Biden Administration designated
31 such hubs in 2023, although current Commerce Secretary Lutnick recently
vowed to put the Administration’s own spin on the program (and just yanked
funding from Spokane’s would-be aerospace hub). It’s nice to give grants
and try to spur the kind of innovation ecosystem Silicon Valley has long
enjoyed, but it’s not so simple.
“People
are putting down roots in these regional tech cities all across the country and
I think that’s frankly good for America,” Julie Samuels, president and CEO of
Tech:NYC, told Ms. Bousquette. “But people who want to ride the AI wave, people
who are really ambitious, who are trying to build big companies, those people
are really attracted to the coasts right now.”
That’s the
lesson that Austin is learning, and that Europe hasn’t quite learned.
Innovation
hubs may be things that one can’t really create, but they are things one can
easily ruin. Making them flourish, ah: that’s the hard part.