How Europe crushes innovation

Startups have a different set of constraints in Europe, one of which is the safety net for the people trying to become "ramen profitable".

Europe does lag behind though for many different reasons. One big is that the single market of EU is on paper large but in practice it is a lot of different countries with very different cultures and languages.

The american style lack of employment protection may play a part in fostering innovative companies, although I suspect being the primary superpower with the world's reserve currency may also play a part too.

How is being incredibly innovative making everyone in the US happy? I just see a lot of division and unhappiness right now. And some very rich people.

Those born between the late 40s and 60s want NOTHING to do with innovation, people, from every social background and culture; the development model imposed after the war has killed Western Europe. From being the former greatest secular innovators, we've become the last wheels on the cart, still with some pockets of excellence, but not for long, and most don't want to capitalise on them. This is without even considering the high-treasonous nazi governments in almost all EU countries that pursue foreign interests against our own. Because this has been happening for decades, to put it plainly.

The populations who, when young, sang "we are always twenty years old" today reject all innovation, and the cure is simply the social fracture that will lead them to marginalisation compared to their current dominance, unfortunately dragging everyone down with them.

But all of this is largely amplified by globalisation. The welfare is not compatible with a world where companies can decide to set up shop somewhere else in the world to benefit from cheaper labour cost and lower regulations and still being able to sell their stuff in the market they somewhat destroyed.

It ends up strengthening the state because workers defer to it and ask it to foot the bill. This all ends up being a vicious cycle where over time the state because massively obese and nothing moves because almost everything is dependent on it to some extent.

Now to be fair it is absurd that companies are allowed to make so much profit and keep most of it, not redistributing to the workers who are actually contributing the most. But it all starts with bad regulations and incentives. Companies cannot be expected to compete with foreign imports that benefit from much lower costs in every dimension, that is just unfair competition.

Free markets are an illusion that only benefits those at the top and this is largely where the problem lies. If imports were to be taxed appropriately, there would be less reasons to delocalize and the job market would be much more competitive for the demand side, rendering the layoff problem mostly moot. Who cares about benefits/compensation if the next job is right there?

Meanwhile it seems that Europe has been pulling ahead of us in measures that affect the quality of life for common people, including the working class. While the fear of "stagnation" was remotely believable during the 1970s, it's clear today that we're the ones who've been hornswoggled.

The US is still better for making software, as China is better for making printed circuit boards, but I'm not sure either of those things are all that bad for the common people.

Sounds like a propaganda piece to suppress both wages and rights here.

But European firms have found some workarounds. For example, lots of engineers are owned, I mean, salaried by service companies who then contract that manpower to whoever wants some. A large company can then modulate year after year how many engineers of what kind they want to work for them. It adds a layer of intermediaries who collect a profit and shuffle paperwork - more costly - but engineers expect less salary to begin with. And this provides less control on who exactly does the work - which perhaps doesn't matter for the bulk of workers. But that's all easier than firing lots of people. It also makes it much easier to modulate between local and offshore engineering groups.

Pooling engineers is big business.

A term they like to use is 'crabs in a bucket'.

Seems like the solution (in both the US and EU) is to have some kind of mandatory severance, probably something like continuation of salary for 1/12th of time employed, up to 12 or 18 months.

Edit: This might impact negotiations with mid-career workers, as it'll make it harder to attract someone with a long tenure at an existing job without some kind of guaranteed severance.

Is that really the cost of innovation? People protections?

I find that alone hard to believe / is the biggest issue in Europe.

When I think of failed innovation I almost never. think "oh man this product would be better if we could fire people".

Here is it: they assume the "innovative" one to be the U.S., not China.

First of all, they're greatly exaggerated. The specific case of a large German company that is union connected doing layoffs is cherry picked. It's basically the most shielded situation possible but far from the norm in Europe as a whole.

I'm from the Netherlands myself. Up until COVID we were on a path where employers were pushing everybody into flex contracts. It's a fixed length contract (1 year with a 3 month trial period) that may or may not be extended.

Maximum flexibility for employers, minimum job security for employees.

Did this lead to some spur in growth or innovation? No.

Europe's problem isn't related to worker conditions. It's a silly thing to say considering ludicrous US tech salaries.

Silicon Valley is the result of gigantic amounts of excess (Wall street?) capital creating a tech Valhalla. A black hole ecosystem swallowing money and talent domestic and abroad. Europe doesn't have this capital and the capital we do have we probably put in US tech stocks.

It's a similar problem to US manufacturing vs Shenzen manufacturing. The Chinese government as well as many Western companies invested decades and hundreds of billions into making it the state-of-the-art factory of the world.

Once it's in place you can't replicate it.

When hackers hear “innovation” they probably think of solving an existing valuable problem better. It seems economists and CEOs think of innovation as finding a better way to extract maximum mental labor for the cheapest price. Then use that to maximize the value of their own equity, at the expense of society if necessary. If you’re building a heavily isolated bunker in Hawaii or New Zealand, you’re not exactly signaling you care about the rest of humanity’s well being.

The business enterprise, in this hit piece, should not be simply another tool for improving the quality of life and helping create a society that's worth living in, but the sole purpose of the society itself.

The "cumbersome process for letting go workers comes with hidden costs" aren't really hidden, unlike the author, but transparent social protections ensuring fair treatment, preventing arbitrary dismissal, and stabilising demand. Something a decent society should fully embrace.

> the sheer difficulty of shedding staff en masse—a reality of corporate life—steers Europe’s biggest companies away from making risky bets in innovative fields

No, thank you. Europe's lag in high-tech sectors stems mainly from underinvestment, fragmented capital markets, and US monopoly power, not employment law. Labour rigidity has no strict correlation with innovation deficits (Germany, Scandinavia, France, Japan, and South Korea all had stronger labour protections than the US and managed to become rather innovative), but why bother with data when the point was simply to bash Europe for protecting its workers from predatory businesses? At best, the evidence is mixed and context-dependent (focusing on patents, for example, instead of genuine innovation)[0], and OECD and Eurostat long-term data show that some high-innovation countries have some of the strongest worker protections and unions.

> investments in disruptive breakthroughs [...] require the ability for big companies to hire lots of staff, then later fire most of them if the projects don’t pan out

Likewise, nonsensical economic justification for precarious work. For the most part, innovation depends on R&D funding, talent, and public infrastructure, not firing freedom (which businesses are guaranteed to abuse). Rather than treating humans as disposable risk capital, the author should take a look at US's own history and they will undoubtedly notice that a significant part of the innovation that it benefits from today was developed when the US had huge taxes, immense investments in R&D and public infrastructure. [1]

Strong social and environmental protections should be the bare minimum for any democratic society. Remove that, and no economic system, whether capitalist or not, is worth having.

[0] https://www.oecd.org/content/dam/oecd/en/publications/report...

[1] https://www.sciencedirect.com/science/article/pii/S259014512...