Europe’s Other Crisis: A Digital Recession | Hacker News Reader

Europe’s Other Crisis: A Digital Recession

hbr.org

41 pointsphilippnagel47 comments

I'm so tired of this bullshit right wing propaganda. It's been going on for decades, and always uses the same formula:

1) Europe (a non-existent as a nation, even purely geographically it's blurry) is in crisis/dying/crumbling. Optional addition: because socialism.

2) The solution is to be like the glorious USA.

Yes the "digital evolution index" does sound a nebulous rag-tag list of stuff that the sponsors MasterCard and DataCash would like govermnets to implement or remove for them.

A complex issue no doubt - but I can't stand opinions dressed as "sciencey" research.

I've noticed that "bad news" about Europe as a rule pop up ahead of a weakening dollar. Just an observation. It's just these "news" are getting more and more ludicrous over time.

If you bury your head in sand that's exactly what you'll think. Try getting out of Europe more often and see what the rest of the world achieves in a year and then you'll come to the same conclusion. Even in case of already advanced countries like Japan, in certain sectors, they are years if not decades ahead of Europe.

Japan is not a good example as it lags in many other areas Plumbing for one

As the op said, there is no "Europe" and talking about it as if there's a single entity is, to European ears, quite ignorant. Practically the only thing Italy has in common with Poland has in common with France has in common with Holland is that they're all very generally liberal democracies. Otherwise, on the spectra of backwater-to-scifi, honest-to-corrupt, socialist-to-capitalist, religious-to-secular, nationalist-to-egalitarian, dynamic-to-sclerotic, authoritarian-to-permissive, you will find everything in every permutation, somewhere.

I get that the US is big and diverse and dynamic. But the EU is far bigger (population wise) and far more culturally / economically / politically diverse.

I know what you're talking about, but I don't see much of that in this particular report. There's no "because socialism" here and it would be utterly ridiculous considering that "socialist European welfare state" correlates positively with "rich".

We can't discount valid criticism just because we suspect it may be motivated by the wrong political agenda. We have to ask if it's true.

Admittedly, the report doesn't make it easy to do that because it doesn't explain how exactly they calculate these rankings, and some of the sideswipes against privacy concerns are clearly misplaced and irrelevant.

But I think there can be very little doubt that Europe's digital economy is lagging badly behind the US and arguably falling further behind. If we don't wake up before the digital revolution eats Europe's auto industry and in the process ruins high tech equipment makers and robotics, we are on a trajectory to become a third world economy.

It's not just the US doing it. I always read newspapers from both sides of the pond and it was especially entertaining during the big financial crisis. Many European publications acted as if the US is collapsing but Europe will be largely unaffected and American ones anticipated swift recovery for the US and deep EU crisis. Even newspapers that you wouldn't normally associate with nationalistic sentiments (like the New York Times) engaged in some serious fear-mongering.

People also respond to these kinds of messages. I visited the US this August, when the euro crisis was often making the news. Several people were seriously and non-sarcastically concerned with my capacity for paying for my own lunch or hotel. They were very surprised when I told them that the euro is worth more or less the same as always in relation to the dollar.

Its sounds like the sort of thing naive/stupid politicians trying to get to grips with the blinkey light boxes lap up.

I cant wait for Steve Bongs take on this in the register

> By many measures, the UK is ahead of the others in terms of its digital foundations and sophistication; for example, the proportion of retail in the U.K. penetrated by B2C e-commerce is nearly twice the European average and higher than even in the U.S.

UK has been doing well compared to others mainly because it's a fully English speaking country and the US already has a history with UK (sort of speak).

It's natural for US companies to establish headquarters in "Europe" in UK first, before any other country. Personally, I do hope US companies consider countries where leadership doesn't favor so strongly mass surveillance and censorship, but either way it has little to do with policies and laws. The language barrier is a huge problem for an "EU single market". As the young generations grow-up with the English-speaking Internet, it will be less of a problem, but right now the language barrier is very much real.

And even in Germany, for the first time ever, the IT business is the largest business. Car manufacturing is down to #2.

How do they get the numbers. Are Banks that offer online Banking IT businesses? And everyone with a commercial website too?

No, they especially do not count stuff like online banking, but companies that directly sell or provide IT solutions, including software vendors, SaaS companies, Hosters, Internet Exchanges, etc.

This includes T-Systems, SAP, Hetzner, DE-CIX, etc.

I do not know if they counted smaller startups like Soundcloud.

Could you provide a link (German is fine)? I couldn't find something like that in the few minutes I searched.

It was something one of my professors showed in a lecture, and I can't find it right now on mobile (especially as I am busy printing a letter, buying stamps, etc to send the livecoding guys a C&D), but you might find some numbers on the BitKom site.

Ireland?

There are quite a few hurdles for small businesses and young startups in Europe to do business online:

* registration of a limited company is not that simple in some countries. UK is relatively easy, but in Germany you need to invest at least 25,000 EUR just to get started. Half of it upfront. Not to mention notary fees and other red tape.

* VAT is a huge pain since 2015, especially for digital goods and services. Look up VAT MOSS aka #vatmess

* language - if you want to cater to a wider audience, localization is still a major aspect and costs a lot in terms of development, content, support etc

* employment rules are usually much more strict. This is generally positive for employed individuals, but when it comes to a small business trying to work with freelancers (or freelancers themselves), they are massive hurdles. I'm familiar with IR35 in the UK, but there's pretty much the same thing here in Germany without having a fancy name... I'm pretty sure similar rules apply in other EU countries as well, but have no actual knowledge about other countries.

Source: being a small fish entrepreneur in Israel, UK and Germany.

EDIT I should also add currency support. Whilst the EUR covers a fair number of countries, there are still exceptions...

I incorporated in Berlin with 1500EUR. I got a shelf corporation, with the documents translated to English so I didn't need an official interpreter @ 150EUR per hour, and the notar costs included. Granted it isn't a GmbH but a UG, so I imagine for some industries that wont work; but for a boutique consulting firm it's been excellent.

VAT is a mess, though. definitely. but then you hire an accountant and you get VAT + all that other tax stuff "abstracted" away for a very reasonable cost.

Has someone incorporated in Delaware and Headquartered in Germany? We are talking small budget here. Is this a nightmare or could work in some instances? Taxes could be a problem I heard. I am working on a feedly competitor (with Popularity Sorting) and it would make sense to concentrate on the US Market first anyway.

From German view you will have to follow almost the same rules and regulations that a German company would have to follow, so not really an advantage on that front. Doing taxes will be complicated though. You would have to pay the same German taxes that every German company needs to pay but of course the US might also want their share. Navigating double-taxation treaties is not easy.

If you need a legal presence in the US it's actually easiest to start two companies, one on each side of the pond, with one of them owning the other.

You should definitely go to a tax consultant knowing this stuff if you consider doing such things.

This is especially an issue with the US, which is notorious for double-taxing income of its citizen that was generated (and taxed) in other countries.

Are you referring to double-taxing or the US's "taxing income earned abroad" policy? It looks like the US has many tax treaties[0], and it's my understanding that these treaties will usually shield you from double-taxation.

What the US does do, however (as I understand it), is tax you on the difference between the income tax you pay in a foreign country and what you would pay if you were in the US. In other words, living in a foreign country with lower income tax than the US won't let you avoid paying at least as much income tax as if you were still in the US. (And if you move somewhere with higher taxes the US won't charge you any extra (nor give you tax credits! :P).)

0 - https://www.irs.gov/Businesses/International-Businesses/Unit...

Extra paperwork (especially when you have to deal with paperwork in multiple languages) can get insanely expensive, though. Which makes the "incorporate outside the US" ineffective.

Looking forward to seeing your beta product! Where can I keep apprised of your company's news?

Thanks. We will launch our beta on feedcred.com in the next weeks. But we haven't setup a dedicated blog or social media yet. I must admit registering a company and marketing are things I have to do my due diligence on very soon.

Good luck, it's a steep learning curve but well worth it.

Q: In function, how does the popularity-based sorting differ from feedly's current popularity algorithm?

Feedly doesn't really sort by Popularity. Instead they simply load ca. 20 entries and select the three most popular entries on the client side as Featured. That being said at scale you have to compromise one way or other.

The Idea behind my popularity algorithm is that I don't want to calculate what is popular among the Users of my service. Instead I want to estimate what is popular with the original User base of each Feed you subscribe to. I think the average User base of The New York Times is different from the typical reddit, twitter or facebook crowd. So this should be an interesting Differentiator.

I'm significantly more excited about your beta now that you've explained it. I think that's a unique and a potentially great way to do popularity ranking.

Fingers crossed that you're also going to have an eye for security

I'm talking about charging VAT for customers in Europe, which means a different rate for every country, and two forms of proof for the actual location. Reporting duties and storing records for 10 years etc... For a B2C company (or even small scale B2B dealing with many small companies) this is a total and utter mess. No accountant can abstract that away to my knowledge.

I want to incorporate in Germany too and am researching the topic right now. Did you use an online incorporation service. If so, could you share a few pointers?

there are cheaper ways to go about it, but I used Foratis and cannot speak higher of their service and product. My partner also formed her own UG but used firma.de, hired a certified but inexpensive official translator, and it took nearly four months from start to finish.

Note that Foratis does not do the VAT registration for you, like some other shelf corporation providers. I didn't realize this and it became a minor pain. Whatever you do, budget for a competent Steuerberater. DIY is nearly impossible unless you have strong German skills, and even my native business owner friends don't DIY when it comes to Finanzamt dealings :)

Thank you very much! I'm not looking for the cheapest and certainly won't go the DIY route. Foratis seems very interesting and they even help opening a bank account, generally a big hurdle. Now off I go find a competent Steuerberater...

You could start a limited company without a capital of 25 000 € at a cost which is comparable to the UK's for seven years now (the so called Mini-GmbH, or formally UG (haftungsbeschränkt)). Sure, it could be much easier (see Estonia as an example) but it isn't much better in the UK than in Germany.

I don't remember the exact reasons. Possibly due to our share split agreement or just wishing to have a "real" company, but my co founders opted for GmbH over UG. In any case it's a relatively small hurdle either way, but still something you have to work out and decide during the early days.

An UG is legally exactly the same as a GmbH (they share most of the laws) with three differences:

* No required minimum capital

* Different name (which signals business partners that you didn't put down the minimum for a GmbH)

* You have to leave 25% of the company's earnings in the company until you reach 25k

Everything else, including all possible agreements between the owners is the same.

Actually, registration of a limited company formally only requires 1 EUR in Germany since 2008. This 'UG' company will then accumulate 25% of its annual profit until 25,000 EUR is reached, at which point it is transformed into a GmbH. The notary costs are significantly less than with a GmbH and the process is much simpler.

I wanted to start a limited company in Spain. After reading the requirements, I faced the other way and never enquired about it again.

Now Spain won't lose much by losing my business, but if everyone's as terrified as I was when trying to incorporate in Spain, suddenly it makes sense that they lack foreign investment.

Don't believe all you read in the Daily mail

IR35 is self employment (its a tax law not an employment law) and in the UK your first two years effectively at will.

Have you actually run a proper company (ie one that employs some one other than you) in the UK doesn't sound like it

We incorporated our startup in the Netherlands because that's where one of the founders lived. It took a couple of months of sending various documents back and forth and required 18K EUR in cash (recoverable) as well as some non-trivial expenses for various fees. Fast forward a few years, we sold our app and liquidated the company. The amount we received in cash before income tax is less than half of what was paid to us. I feel like I was working for the Dutch government this whole time. Obviously not happening again.

Then you weren't informed/advised properly, because it's possible much easier and cheaper, especially for digital goods suppliers. But yes, if you naively follow the simple interpretation of the law and/or what the website of the tax office says, you'll get shafted.

Not about article itself, but design of the website made me consider if it's worth reading.

Fixed header and footer takes 25% of my screen's space and distracts greatly. If my screen would be somewhat smaller (e.g. 11-12'), first graph would barely fit in between header and footer.

4 websites deeper I finally found at least an outline of what are they actually measuring:

"Our data and insights are calculated and measured utilizing four drivers.

Digital Economy Driver - Demand Demand: covers consumer income and demographics as well as internet usage.

Digital Economy Driver - Supply Supply: focuses on technology and infrastructure and whether or not they can support digital commerce and transactions.

Digital Economy Driver - Institutions Institutions: accounts for government policy and access to trade.

Digital Economy Driver - Innovation Innovation: rates the environment for creating startups and the overall competitive landscape."

HBS - Sullying the Harvard name since 1908

Yet the UK PM is keen on making things much tougher for digital startups - http://uk.businessinsider.com/immigration-cuts-will-hurt-uk-...

Isn't this what Estonia is trying to solve with their e-residency initiative?

The index's criteria...

...high levels of digital development are attractive to global businesses and investors and that their digital ecosystems are positioned to nurture start ups and internet businesses that can compete globally

...is so nebulous and silly how could anyone take this seriously?

The graph on HBR is a bit weird. Czech and Slovakia are just next to each other geographically (used to be same country), Czech are pretty far in terms of getting things done digitally and yet they are classed as rapidly receding, Slovakia is in the "slowly advancing" category. I'm sure there are minute differences between those countries but as vast as the graph portrays...

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