Hacker News Reader

Comment by Barrin92 | Hacker News Reader

As usual the article is almost exclusively concerned with market capitalization as an indicator of economic success. Countries like Germany are dominated by small and middle-class, family owned business. 'Big corporate' is indeed more successful in the US or China but it's just one model to manage an economy and I don't think it's that great. One of the most important points is also buried at the end of the article

>"These internal barriers mean Europe has many smaller firms operating at national, not continental, scale. Each country tends to have its own banks, utilities, airlines and supermarkets. (Europe has over 100 mobile operators, compared with a handful in America or China.) These lack the economies of scale and opportunities to grow quickly enjoyed by firms plying the American or Chinese markets."

Europe has no homogeneous consumer market for tech giants like the US or China which can propel tech firms to gigantic size. And honestly I consider this a feature instead of a bug. It seems like profits aside the major other thing they seem to promote is damaging competition, democracy and pushing surveillance. If it was up to me Europe should use the decline of business giants to double down on the idea of the 'Europe of regions'. Small, diverse and robust business that does well on international markets, pays attention to its stakeholders rather than just shareholders, and does not just pursue growth blindly.

View on HN

In defense of the article (not agreeing nor disagreeing), the article then includes reasons why it is concerned with market capitalization:

>But if it continues, the waning of Europe’s business will bring consequences. Big firms invest in innovation, which boosts economic growth. Left to regulate only foreign groups, Europe’s ability to shape global business norms—on privacy, say, or the uses of artificial intelligence—will look weak. European policymakers’ cries for “strategic autonomy” will come to nothing without corporate backing.

>Europe’s smaller firms now find themselves competing against global behemoths with inbuilt advantages. Large firms can afford to buy and try new technology, borrow at cheaper rates and absorb fixed costs more efficiently. They tend to spend relatively more on research and development. The dearth of big companies helps explain why European spending on research, at 2.1% of gdp, is below the average of the oecd, a group of mostly rich nations.

I have no certainty about few, big corps vs. heterogenous medium sized corps, but I think the point has about Europe's ability to influence global norms/best practices has validity. Europes influence could be negatively affected without strong, global presence by local companies in sectors it cares about influencing.

We prefer to influence global norms/best practices via our democratically elected governments, instead of via corporate behemoths who probably don't have our interests in mind.

On the other hand, contrary to the US, in Europe we generally trust in our governments. Since we do not have huge corporations here, it's more difficult to influence government decisions, specially at Europe level.

I just hope it stays that way. I fear that all the cynics blaming everything that's bad on politicians and the EU (instead of the voters putting those politicians in power) will eventually degrade trust in that in itself nicely working system ... and then, what's the point defending that system against the populists and fascists wanting to take over? They can't be that much worse ... :-(( [same with media that does a good job in Europe]

> I fear that all the cynics blaming everything that's bad on politicians and the EU (instead of the voters putting those politicians in power)

Yes. Last year I started playing an browser game about running your own commpany and got interested in economics.

If capitalism can be fun inside a game, how come it isn't fun in real life? After all a game that disenfranchises new players and prevents them from playing the game is going to die over the long term. People would quit the game the same way they quit their job. There must be a fundamental difference in how the game has designed its economy vs how we designed our real economy.

For example, unlike real life it's possible to win a video game. It's possible to have produced everything everyone else could have possibly wanted. At some point there is simply too much stuff and not enough buyers. The game would die from deflation. The game devs have strategically placed market maker NPCs that buy products at an extremely low price that is never worth it unless there is sufficient deflation. It's basically a job guarantee, it's demand side stimulus. Dumping your resources into the MM will cause inflation, which will raise the price of your resources until it makes more sense to sell your resources on the market to other players. Even if there are large players dominating the market and dumping prices to rock bottom rates, it will always be possible to earn some money until those prices are no longer rock bottom.

The point isn't that politicians should implement a job guarantee (it would certainly help though). It's that politicians have the power to design a working economic system. I always was under the impression that these politicians simply didn't understand the economy but that's not the case. They aspire to a certain form of capitalism that is good over the long term but just happens to suck over the short term right now and people willingly vote for them. Things are guaranteed get better once China, Eastern Europe, Africa, South America have caught up with the US and rich part of the EU but how long is that going to take? 40 years?

You just need to break the chain for 8 years, get things back in order over the short term. Biden is doing it. The EU has to follow similar actions but that requires voters to not choose right wing populism or the same old party they voted for 20 years straight, they need to vote for parties that actually want to help them.

> The EU has to follow similar actions but that requires voters to not choose right wing populism or the same old party they voted for 20 years straight

Yeah, but it seems like voters tend to vote for the same party so long that it kind of kills the competition (if I know that I'll be re-elected no matter what, why behave?), and then suddenly voters get pissed because they don't get ... something, whatever, not sure they know themselves ... and vote for populists.

But every now and then the times are just right that some competent government is elected that implements some well thought-through laws, that have sufficient positive effects over decades to compensate for all that. At least until now.

OTOH megacorps rarely "innovate" from within, they're too bureaucratic and management stakes are too high for fast risk-taking. What they usually do is to buy out smaller entities that have somewhat proven the concept and pretend they're geniuses for having found a truffle.

Also they have no reason to innovate if they got a monopoly. Sometimes they buy that small innovative company and then that nice idea somehow just dies ... maybe cause it'd hurt their business model?

Solar city was basically a series of acquisitions. It ended up being bailed out through the Tesla acquisition but once Musk bailed out his own Solar city stock/bonds he gutted the Tesla Energy (Solar City rebrand) branch and basically pretended that it never existed in the first place. The solar roof was just some hyped up product to get the acquisition through.

> The solar roof was just some hyped up product ...

Musk style. Still not sure if all the hype is worth the results.

> "(Europe has over 100 mobile operators, compared with a handful in America or China.) These lack the economies of scale and opportunities to grow quickly enjoyed by firms plying the American or Chinese markets."

This is such a bad example, I count 6 European carriers with more subscribers than AT&T.

https://en.wikipedia.org/wiki/List_of_mobile_network_operato...

> "These internal barriers mean Europe has many smaller firms operating at national, not continental, scale."

Looks like they're not interested in continental scale because they're already at global scale with together 1.4B subscriptions.

I generally agree with the point but this is a bad example.

Also, don't Americans complain all the f**ing time how bad their broadband internet is?

German and Austrian broadband is equally worse.

Because of a lack of competition, it’s the same issue as the US, but at a smaller scale (at least in most areas you can subscribe to multiple ISPs).

E.g. in The Netherlands you can subscribe to a large number of ISPs. In the largest part of the country either through *DSL or cable. Increasingly also fiber. This is because the government regulated internet access very early on. When the state telephone company was privatized, they were forced to make the infrastructure available to others.

The power of real competition (in contrast to ‘winner takes all’) should not be underestimated. As a result of a free market + some government regulation, anyone in the country can subscribe to an ISP that actually cares about their customers.

Xs4all was a provider that literally grew out of the hacker community and proactively fought for their user’s freedom and privacy rights (e.g. by supporting subscribers in court who were sued by Scientology for revealing information about the Church of Scientology on their Xs4all webpage).

At any rate, at some point Xs4all was bought by one of the largest ISPs (KPN). For a very long time they operated as an independent unit, continuing their strong stance on ethics. The last few years, they have been assimilated more and more by KPN. A few former employees and other supporters decided to start a new ISP, freedom.nl, that carries on the privacy/freedom angle of Xs4all. And with relatively little capital investment they are now up and running and anyone living in The Netherlands can subscribe to them.

This is only possible in a market where regulation enforces real competition. I thing regulated capitalism is one of the strengths of Europe. It may not always result in the best outcome for shareholders, but it’s definitely great for the general population.

Do we always get it right? No. I lived in Germany for 5 years, and indeed, the ISP options and quality were pretty miserable.

Yeah it heavily depends where you live, in Germany. In or near larger cities, there's lots of really good options.

Its funny how Germany was ruled for 16 years now by a party whose voters live mostly in rural areas, but didn't do a lot for those areas ...

>Its funny how Germany was ruled for 16 years now by a party whose voters live mostly in rural areas, but didn't do a lot for those areas ...

It's the same with trump. He mostly cared about himself. The only thing he did right for his voterbase is starting the trade war. From a pragmatic standpoint the tradewar was necessary, even if it's not the best thing you could possibly do. The point is that the economy is very slow, the short term can last decades. Hoping for an economic recovery that pulls up everyone will happen one day but not within the term of any politicians of today. A tradewar is a quick hack to achieve full employment.

Its interesting that you get downvoted just for saying that we should have government regulation that leads to working markets with a healthy competition making things better for people.

> I thing regulated capitalism is one of the strengths of Europe. It may not always result in the best outcome for shareholders, but it’s definitely great for the general population.

yeaaaah :)

This is a discussion about market share, not quality.

Rightly so. It's absolutely pathetic, and it's because of the lack of competition through the scale of those who own and control the market, combined with the government keeping their hands off the market-controllers.

Purely rent-seeking and stagnant. Pathetic. Damagingly awful.

Exactly, all else being equal this article actually makes me want to invest in a European total market index.

It's basically the only continent currently which have an acceptable price earning ratio.

Even if it's true that American whales had 10 years of exeptional growth, they are priced as if they will be able to have the same growth for the next 10 years.

I’ve made 50% returns (!) in 2 years on the Greek market index ETF…

“No big companies” is a fine policy for things that don’t require a lot of money to innovate on. A small business will never be capable of producing anything like the iPhone for example. Pushing the envelope on tech is very expensive and this is where Europe’s current model doesn’t work.

If it’s just companies reselling existing things or incremental tech (e.g. grocers, telecoms, utilities, airlines, etc), then smaller companies are nice.

Europe had iPhone precursors before iPhones were a thing.

https://en.wikipedia.org/wiki/Nokia_Communicator

And don't forget ARM was initially a UK/EU design. Arduino and Pi still are.

Also not doing so badly with fintech and entertainment.

https://www.information-age.com/value-of-european-tech-compa...

> Europe had iPhone precursors before iPhones were a thing

That’s the point. Where are they? They couldn’t compete due to lack of scale. They couldn’t scale due to structural restrictions on scale.

The next iPhone isn’t going to come from Europe. It may be first developed there. But an American or Chinese copycat will rapidly advance upon them.

The previous range of state of the art smartphones did come from Europe. They couldn't compete but not because of structural restrictions on scale - just because of a series of bad decisions that were independent of the continent they were developed on.

It's more likely the next generation will come exclusively from China - not because of structural restrictions on scale but because it's deliberately built up its electronics manufacturing base while the US and Europe allowed theirs to dwindle because short term profit margins outweighed long term industrial strategy.

> previous range of state of the art smartphones did come from Europe

Right, but where are they now? The article says in just its third paragraph that "Europe used to pack a punch." Up to 2000, "nearly a third of the combined value of the world’s 1,000 biggest listed firms was in Europe, and a quarter of their profits." That aligns with the state of the art having a home in Europe around then.

But something changed over the past 20 years. It's apparent from the outside looking in. But it remains--as made apparent by this thread--shockingly controversial within the Continent.

Who says the change was in Europe? The US got around to leveraging its comparative advantages in internet tech and grew some huge companies. The Facebook was never going to emerge from Poland, no matter how much public policy tried to support smart Polish engineers building PHP frameworks for people to upload pictures of their friends. Europe did not create any Facebooks, but achieved comparable productivity and GDP growth rates spread across a more diverse range of fields, and excelled in fields like Coronavirus vaccine research despite comparatively modest success stories in selling digital advertising. It is not obvious that we are worse off as a result, or that a giant company like Facebook is substantially more likely to come up with the Next Big Thing in technological progress than a merely large one like Siemens, or even a reasonably well capitalised research company well outside the top 1000 firms. The value of growth is demonstrated in goods and services, jobs and potential for goods and jobs across the entire economy, not in vanity metrics like number of companies with enough monopoly power to show up in top companies indices.

(And China was always going to move up the value chain in consumer electronics and grow faster than both of us; when it does so further in the next couple of decades it need not represent a flaw in US/European policy)

>That aligns with the state of the art having a home in Europe around then.

Does it? Bigger doesn't mean more state of the art. Comcast isn't state of the art. Exxon isn't state of the art. Most big companies aren't Apple.

Moreover, the size of American companies is somewhat exaggerated cos of liquidity being pumped into the stock market.

The US gov didn't pump liquidity directly into the stock market: they reduced the cost of borrowing, which increased investment in basically everything, e.g., collectible baseball cards. My point is that investors bid up the price of European stocks as well as US stocks.

Nokia? Lack of scale?

Nokia couldn't compete because they made a string of incredibly poor investment and management decisions, such as the N-Gage, until their mobile division was eventually bought out by Microsoft. Even with Microsoft's scale they couldn't turn things around.

The reality is that there were a number of mobile phone manufacturers making lots of really bad decisions whilst trying unsuccessfully to compete with the likes of Apple and Samsung. They aren't gone from the market because they lacked scale: they're gone because they were stupid.

Microsoft buying Nokia had nothing to do with saving the company. Arguably, buying Nokia and running it into the ground was an expensive gamble to push Windows 8 Mobile + Windows 8 desktop at any cost. Which was already failing before the acquisition was even complete. I'm still stunned the Finish government allowed it to happen. Nokia went from, "probably could turn this around" to "smoking wreckage of a company" in less than a year.

At least from Risto Siilasmaa tells a different story in his book. He was in the Nokia board in the last good years and then lead the effort to turn things around. If I remember correctly, he writes in his book that at the point of sale to Microsoft, Nokia was already very close to go under. In Finland, it is generally seen that the deal with Microsoft was a complete steal from Nokia, they got much more than the value was at that point and Microsoft even agreed to loan them hundreds of millions to buy full control in Nokia-Siemens networks.

> They couldn’t compete due to structural restrictions on scale.

Mhm. Cause a working marked with healthy competition never did anything good.

Just one question, how did European car makers then become what they are? Even though its impossible?

> how did European car makers then become what they are?

Cars have for a long time been tightly linked to the military. Every major Western car maker up to the last decade at some point built tanks.

So basically you're saying Europe should start another World War to make sure their companies stay competitive?

> you're saying Europe should start another World War to make sure their companies stay competitive?

No. You asked how Europe got certain economies of scale. I answered. Through the engines of past wars. Future wars don't guarantee similar results.

If Europe wants globally-relevant big businesses, it will likely require social upheaval on the scale of war. (I’m not betting on it.)

The precursors to the iPhone were just garbage (I say this as a power user of these devices). There is a reason Android dropped their existing plans to mirror the iPhone form factor. It was a fundamental shift that fixed so many usability problems that it started the entire smartphone revolution.

> And don't forget ARM was initially a UK/EU design.

For sure, but ARM doesn’t manufacture and has not meaningfully stepped into the datacenter where low power could be a home run with some more effort.

>Arduino and Pi still are.

Yep, but these serve very little of the public. The Pi as a desktop for regular users has failed.

These are great companies but they don’t have the engineering and financial muscle to completely reshape entire industries. You need to own the stack top to bottom to do that kind of change and those companies are innovators at just one level.

Software often does not rely on huge capital. There‘s a bunch of European companies that have a good chance of doing exceptionally well (klarna, trade republic, celonis, biontech come to my mind, for example).

That's changing. A search engine index requires titanic amounts of capital. Likewise so does building a web services platform that can compete.

Meanwhile, if you don't have a platform like that to build off you are severely constrained in many other markets. Look at elastic - this is the kind of business that will dry up in the next 5-7 years. It's structurally unable to compete without being part of a major web services platform.

It used to be that building a car company didn't require a huge amount of capital, either. Detroit had hundreds of small automotive businesses before consolidation under the big 3 took place. We are witnessing the same process take place in tech.

What's your point? That letting tech giants taking over just for a little faster innovation is worth it? Maybe the European approach is a little slower, but leads to better results?

But then ... what technology was really advanced by companies like Facebook? Except the ad-surveillance-machine and stuff you only need if you run a multi-billion-people "social" network ... the only thing they innovate in is business models that hurt society.

Once big companies take over innovation stops and other companies win.

The US does have some major advantages, marketing, flag waving, cultural supremacy (which feeds into marketing), and the ability to create and exploit rent seeking at a global scale.

It benefits the companies and the share holders, but doesn’t neccersarilly benefit the American worker. Nobody care that Nike and Addidas are used globally when the employees are in Bangladesh on 10 cents an hour.

My point was only that once an industry matures it starts to consolidate and demand huge amounts of capital to compete.

And, that software is maturing.

In much the same way Japanese automobiles didn't compete with US in the 60s by having a plethora of automobile startups started in peoples' garages. It was done with large companies copying American tech being plowed with lavish subsidies and a protected domestic market.

Europe will likewise not compete with American tech head on with small tech startups either. That ship hasn't quite sailed yet, but I don't think it's far off.

I hope I'm wrong.

Yeah but doesn't Apple rely on European companies like Bosch for sensors and stuff? So, no iPhone without those crappy uninnovative European companies.

Oh and Linux and the WWW were developed in Europe, if I remember correctly?

Yes, but how is Europe monetizing those things? Just because something was invented here is irrelevant if people can't use it to pay rent or create new well paying jobs.

They are produced in Europe (Bosch, STM, Infineon etc.. have way more factories in Europe then outside it) and pay taxes there.

Intel, Nvidia, AMD and Apple M1 chips are (mostly) not made in the US but they generate more revenue for the US tech sector as they're high-margin products and their US based designers extract most of the value from their sales with Asian based manufacturers TSMC and Samsung being next in the food chain and quite recently announced building new cutting edge fabs in the US, instead of Europe. That should tell you something.

Europe making high volume low margin chips is not bad (especially in the current shortage) but is not the best position in the market you'd want to be in, especially long term with China hot on your heels. Just ask any business analyst.

Intel chips are made in the US.

Europe _has_ monetized these thing, through open source companies like MySQL and QT. But even if it hadn't they're still a net positive for society.

Creating jobs isn't monetizing. It's the opposite, it's SPENDING money. People as a rule paying rent more easily and having better paying jobs is what the EU looks like. The scale factor of US mega-companies is about heightened efficiencies of scale making the companies not HAVE to 'create as many jobs' as a hundred smaller companies would have to create. You've got it all backwards as far as how the giant US companies are competing.

You DO NOT compete by paying more to the workers and having more workers than the competition. EU is doing the things you say are good, and that's why they are not competing as well with the giant US firms.

So doing good is a bad thing now? Not the whole world follows the US approach where only making money seems to count. Luckily.

On January 8, 2007, the day before Jobs announced the iPhone, Apple had a market cap of $73.76B (source: https://www.macrotrends.net/stocks/charts/AAPL/apple/market-... ) That's not exactly tiny (except if you compare to their $2T today) but it's also not exceptional. There are hundreds of companies of comparable size, including in Europe. And they gained experience producing mobile devices with the iPod released in 2001. I can't say what size company they were back then (my source only goes as far back as $33B in 2005) but certainly they were smaller.

So I think it's wrong to say that "A small business will never be capable of producing anything like the iPhone for example." since a small business can become a bigger company releasing innovative products like the iPhone.

Yeah isn't that kind of the idea how innovation in working markets with healthy innovation (i.e. no monopolies preventing innovation by smaller companies) should work? Funny how that is forgotten when it comes to comparing penis sizes.

Fairphone is European and small. There's really interesting enineering under the hood.

If anything, Apple is the counter example of being efficient at innovation. They mainly package and market existing ideas in a really efficient way, but having such a capitalisation actually create so little is a waste. The same money spent on a lot of smaller companies is much more likely to produce actual innovations

> They mainly package and market existing ideas in a really efficient way

This is completely erroneous. They do often take ideas originating from outside the company, either by acquihires, consuming open source, or simply just using unprotected ideas.

However the amount of resources they pour into refining and integrating those ideas into a platform that can be manufactured at scale and that consumers and developers can absorb is very large.

It’s fair to criticize Apple for not originating core technologies, but to suggest that they don’t invest much in developing them is just inaccurate.

I'm not saying they don't invest much, I just say the result is really underwhelming for the capitalisation they have to say the least. It's just more of the same thing year after year.

So yeah, they invest a bit, but it looks like a big waste of resources in my opinion. The same money given to a lot of diffferent companies would drive much more innovation and employ much more people.

> I just say the result is really underwhelming for the capitalisation they have to say the least.

Given that they are the market leader by far in many of their product categories, it’s odd that you imagine someone else could be doing better with less.

The fact is that nobody actually is.

If you are right, then whatever disappointment you have in Apple, presumably applies even more so to their competitors.

> It's just more of the same thing year after year.

You mean they haven’t introduced enough new product lines?

Their actual technology platform is dramatically different today than it was 5 years ago. If you think it’s just more of the same, it means you are only looking at the outside.

> The same money given to a lot of diffferent companies would drive much more innovation and employ much more people.

The same money is given to a lot more people and hasn’t.

>Europe has no homogeneous consumer market for tech giants like the US or China which can propel tech firms to gigantic size.

Yet they use Google and Facebook all the same. WhatsApp was an American company that wasn't even used in America but dominates Europe.

As far as domestic companies go, Nokia was a former megacorp and SAP is still one today, which proves that big tech has always been a possibility there. However, they were founded ages ago.

The state of mind is changing though, especially with Facebook - Europeans are aware what happened to the US in the last few years and are scared of a new wave of fascism powered by High-Tech social networks and fake news, more so than US citizens. This won't lead to a European competitor for Facebook though, just to regular people shunning everything that's made in the US. So in the long term only China will profit from the US's tendency to create (too) big corporations. The bigger is better mindset is ultimately not compatible with European values.

But what has Whatsapp to do with innovation? There's nothing innovative about a messenger app. They only thing they did is degrade privacy even further.

Whatsapps original purpose wasn’t where it reached its niche. It was in the right place at the right time - it launched as it became easy to distribute apps, and it used free data (wifi or gprs) to undercut sms. This latter fact wasn’t valuable in the west, but was great in poorer countries.

This built up the network, and unlike the European and academic way of building open networks and software (web, linux, email) it captured the walled garden.

I have no idea why it was valued at however many billions though even with that.

There’s nothing special about WhatsApp that signal and telegram don’t do other than that existing network, primarily driven by laziness of the consumer (as there’s no reason you cant have all the apps installed)

> primarily driven by laziness of the consumer

oh yes :(

> unlike the European and academic way of building open networks and software (web, linux, email) it captured the walled garden

That's why politics should make sure those walled gardens have huge holes all around those walls. And no, its not the politicians fault, its the fault of the voters that they don't put politicians in power doing these things.

Putting all your eggs in one basket with a handful of extremely large companies might not be a long term winning strategy. Companies fail eventually. Big companies are no exception. When they do, things get ugly.

The FANG companies are great at hoarding wealth but not so great at converting that wealth into new things. You need small, nimble companies for that. And not necessarily the VC funded Silicon Valley variety. Which of course is basically the FANG companies (and their clique of wealthy investors) trying to own and monopolize the future.

A dynamic you see in Germany where I currently live that I find very interesting is that of family owned businesses thriving and adapting to modern times every few decades. Germany has a lot of very wealthy families and some of these businesses are multi billion euro companies that you probably have heard off and there are loads more that you may not have heard off that are also worth billions.

Lately some of these companies are discovering the virtues of going online with their business. You might argue a few decades too late. But we are talking real businesses, with real markets, real customers, and real profits, real products, etc. They'll be fine. They are simply adapting and integrating commodities like the internet and making it their own. In some cases they simply skip a few steps and fast forward to what many other companies might still consider science fiction. Some of them make it work and prosper, some don't. And they disappear or get replaced by something more successful. It's organic, highly adaptive, chaotic, and competitive. You might even say that this is capitalism actually working.

Some of those commodities are provided by the above mentioned FANG companies. But how crucial are they really long term? Amazon is nice and all but it's basically just a logistics company with a side business of running cloud based services (or the other way around). I've used both and it's fine. But I also use competing services and products. Amazon being big doesn't make them better at what they do. Often it's the opposite actually. Bureaucratic, slow to adapt, not able to tap into opportunities when the payoff isn't measured in billions/trillions, etc. It takes more agile/nimble companies to do that. You find these companies all over the world.

Reply on news.ycombinator.com