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Comment by melling | Hacker News Reader

Interesting article by Michael Moritz of Sequoia Capital.

China is taking the lead.

“All lists of private companies contain degrees of subjectivity and error, but the Wikipedia ranking of unicorn start-ups by value offers a peek into the future. For westerners, it should be disconcerting. Of the top 50 entries, 26 are Chinese and 16 are American. There are none from Europe. The Chinese also dominate the proportion of the most valuable of these companies. Of the top 20 with an estimated market value of over $10bn, 11 are Chinese, six are American and two are Indian. “

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Europe needs to build its own tech ecosystem instead of being a resource hub and market for US companies. There were some sense in the French driving Peugeot, the Germans VW and the Americans Ford, instead of all driving a generic car from a distant silicon valley company far away from local market and value chain.

I don’t really understand how Europe has struggled so much. Is it due to a lack of investors? Brain drain or some comparative lack of talent (I doubt it)? Regulations (also doubt it)? Cultural differences? Difficult domestic market?

Fractured market for sure, but also cultural differences (mentality).

What's standard bread&butter hustling in US is considered cringe-worthy BS in Europe.

While the music plays, there's no way business conservatism and sticking to "fundamentals" can compete with SV unicorns.

Probably a combination of all three. The US and China have the benefit of a comparatively gargantuan native population that all speak the same language and enjoy similar tasting kool-aid that you can immediately market to. A business in SF can reach people NYC, Florida, etc. Combine that with somewhat lax customer rights laws (however you may view it), and you have recipes for some explosive growth.

I've also heard that European investors are notoriously conservative in their strategies and don't take the risks that the US does. Japan is also faltering in this department for that reason. Without the pools of money to draw from, if you cannot gamble then you cannot win, essentially.

> Probably a combination of all three. The US and China have the benefit of a comparatively gargantuan native population that all speak the same language

As odd as it sounds, my understanding is that China's Han population doesn't all speak the same language, but they (for the most part) read/write the same language. They call the variations in spoken language "dialects," but many of them are mutually unintelligible. I think the situation is the similar to a hypothetical one where the Romance countries (e.g. France, Spain, Italy, etc.) speak their respective modern languages, but continue to write exclusively in Latin.

Just a small unimportant quibble that doesn't negate your larger point.

Still, the difference is size. In China, 20 million people speaking the same language is a city. In Europe, it's a country.

It's hard to understand. On paper, it has all the ingredients. Highly educated rich market. The EU created a 500 million common market which should allow European companies to scale. SAP, Spotify, Philips, ASOS, Skyscanner and even Nokia/Skype before take overs were/are tech success stories. But looking at the largest companies by revenue in Europe you see they are dominated by 20th century largely traditional industries (oil, engineering, food). Ref: https://en.wikipedia.org/wiki/List_of_largest_European_compa...

To me an important part seems to be the fact that the US has an extremely competitive tech sector – personified in Silicon Valley – that has been cultivated over decades, basically since the US rose to prominence after second world war.

Through innovative symbiosis between universities, business', talent, steady US defence spending, plentiful of financing and business friendly regulations it has become the preeminent tech sector only rivalled by the Chinese which was born out of protectionism. With the invention of the internet and the unprecedented level of free trade, a few companies from Silicon Valley has successfully monopolised large part of not only the US market but also the European market. And not only that, this was done in record speed, Facebook was only founded in 2004. Traditional manufacturing sectors are much more dependent on the local market than tech companies.

After the second world war Europe was destroyed and effort when in to rebuilding countries and relations. Furthermore the mindset that gave birth to Silicon Valley to combine raw capitalism with university campus' wouldn't have had a chance. Rigid universities, socialist political discourse and unions would have prevented it. Perhaps the mindset is changing, question is to what degree protectionism will be used to gain a footing in the vital tech sector.

A few factors:

1. There is no common language so hiring is typically restricted to one country.

2. Taxes are very high, particularly social security taxes that must be paid by the employer. Firms are very reluctant to create jobs.

3. A lot of bureaucracies are old and inefficient.

4. For the same reasons, products are difficult to scale. You can go from a local product in San Francisco to a national product in the USA relatively easily. But in the EU you are dealing with multiple languages, cultures, country bureaucracies in order to make the same jump.

The best thing for the EU would be to get everyone speaking English at least as a second language. Then, to require all official forms, Government engagement etc. to be in the national language and English.

Imagine you go from working in Warsaw to Berlin. A distance of only 570km, but you need to be able to speak Polish to deal with Polish bureaucracy, English to work at the multinational firm, and German to deal with German bureaucracy.

The US goverment / military dumps obscene amounts of money into the development of technology. This provides a solid foundation on which to build a thriving consumer technology sector. It's totally viable to develop and bring to market devices that cost millions of dollars per unit as long as it possesses some modest degree of military application.

Per capita this doesn't seem as terrible. Is that the wrong way to look at this?

China has ~1.38 billion people USA- ~326 million

Yeah but I guess what is remarkable is the trajectory from 1990 to 2018

It's been a very predictable trajectory. I recall reading in the mid 90s, as a high school student an op-ed that anticipated China's GDP to exceed America's sometime in the early 2020s. They're right on course to do that.

Okay, but the debt to GDP ratio is much higher in china. See my previous article, China 168% of gdp, us 45% of gdp.

>Sequoia Capital.

Rephrasing: Chinese sock market is more plump, and more crazy than American. If you are in a business peddling BS stocks, there is no better market. I'm extremely sorry for use of vulgarities there, but I know of no other words in English language to characterise that.

On other hand... China's tech scene beats the silicon valley even without any stock market backing. And it is its beauty. China is probably the last place in the world where BS "high finance" has not yet gobbled up the tech scene.

Things are still done by real men of merit, real industrialists, real Chinese Carnegies. I personally knew of people who secured cash on the table for their businesses from them with just gentleman's agreement without them bowing down to any of "high finance" gatekeepers.

To Sonny

>I'm actually really surprised there isn't some great, commonly available mobile OS from China commonly available here ...

Well... a big part of South Asia know no other mobile OS other than what I call "Chindroid." Something that comes with custom skin on top of Android 2.0 era forks of Cyanogen. There is a whole culture grown around that.

>Then why does nobody outside of China use Chinese tech? This is a paradox that flies in the face of all the 'great news' coming from China.

I'm totally disagreeing with you on that. China's tech is ee-ve-ry-whe-re... except for America...

What half of Africa uses? A $20 dollars white label BuBuGao phone.

What half of South Asia depends on water filtration? Cheap Chinese membrane filters.

Who makes 70% of industrial chemicals, 30% of generic medicines, and 50% of precursor chemicals?

Whose heavy equipment is used everywhere outside of developer world...

Who has a complete dominance in manufacturing machinery?

Whose white goods totally dominate every non-OECD country?

This list will span for a kilometre.

Behind all of these things stand businesses that are head above all those "unicorns" where it comes to being considered "substantial"

Nobody will blink an eye if one of those 10000 facebook.com unicorn clones will disappear tomorrow, but if something will happen the biggest maker of fertilizers in China tomorrow, the whole world will turn silent for at least a few minutes.

Then why does nobody outside of China use Chinese tech? This is a paradox that flies in the face of all the 'great news' coming from China.

In HK, nobody uses Baidu, they use Google.

The article is misleading because the size of these 'new industries' like 'car sharing' is going to be a function of the size of the economy, so really, it's like measuring the size of the banking sector ... it will be a % of the economy and that's that. Since banking is protected, it will be domestically owned. In China, so many sectors (all of them?) are strongly protected in so many ways so the outcomes are all rather predictable. Ride sharing, search etc..

For AliBaba though, and situations wherein they have done things differently given the state of their economy, they can claim a separate path and it'd be rather difficult to predict outcomes.

But those things notwithstanding ... we're still not using any chips, OS, software, services or tech out of China just yet.

I'm actually really surprised there isn't some great, commonly available mobile OS from China commonly available here ...

Ehhh, Rigol is a popular oscilloscope brand with non-professionals. Rigol is Chinese.

https://www.rigolna.com/products/digital-oscilloscopes/1000z...

edit: and I should add, I think they redefined the market somewhat.

Touché. Kind of. I don't doubt there are things here and there, but if what an HN knowledgeable can come up with is 'Oscilloscopes' ... well then you might have made my point for me.

I am perplexed by the lack of Chinese tech that we use and I think there must be some reasoning behind that.

Our markets are 'mostly open'.

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