Comment by pembrook
8 months ago
Yes, Europe did have great entrepreneurial culture in the past, but the point of the “founded in the last 50 years” distinction is to measure how things have been going for entrepreneurs who are still alive today.
You can’t call a region a “safe haven for entrepreneurs” if all the globally relevant entrepreneurs from that region are dead from old age.
Remember, Europe has double the population of the US. To lag behind so dramatically in the last 50 years is absolutely something to be concerned about.
Having to move the goalposts to the 1850s to make a point about relevant European businesses should be alarming to you.
Your point is well taken, but I think we need to question why Europe declined so significantly as a centre of innovation.
A big part of it is obviously the relative effects of twentieth century wars, both hot and cold. However, we also need to be aware that in recent decades, the US has just offered a better deal for entrepreneurs than Europe. By that I mean it has been a democratic, rule-of-law-based country with relatively easy access to capital and relatively low taxes.
It still has the last two things, of course. But the first two are also essential, long-term, and if they're eroded then the US might stop looking like a better deal.
I agree, but most Americans don't; I suspect we'll see in the coming decade or two, unless the US executes some kind of implausible course correction.
On the one hand, studies have suggested that nearly half of highly successful entrepreneurs/founders in the US are immigrants or children of immigrants. As the US becomes more authoritarian and more corrupt, its easy to imagine people choosing to do their new startup from, say, Berlin.
On the other hand, lots of people choose Singapore, too; rule-of-law-based country with relatively easy access to capital and relatively low taxes — but without actual democracy.
I'm aware of my own inherent bias of wanting democracy to be important to people when making this kind of calculation, but I'm not sure that we have any real evidence of that.
The reason that I think rule-of-law will always be important to entrepreneurs is that if you don't have those things, then you're always at risk of the King taking what is "his" and you being left with nothing to show for all your efforts. In England, this problem led to the basic foundation of our democracy. The primary aim of the Magna Carta was for the Barons of the land to inform King John that yes, he was also subject to the law, and no, he couldn't just imprison them and confiscate their lands at will.
I do agree on Singapore, though. It's an interesting case in that the benevolent dictatorship offers most of the advantages of Western democracies in terms of a law-based contract between rulers and the ruled, but with (arguably) a more solid promise of long-term social stability. There's definitely a chance that we all end up in that situation.
Lag by what measure? Cities are just better as cities, laws are annoyingly bureaucratic but actually work, your neighbour isn't likely to shoot you dead... The US does better on abstract statistics like GDP, but... GDP is biased in favour of whoever issues the global reserve currency, so that doesn't actually mean a lot unless you are specifically trying to accumulate units of global reserve currency.
These are all logical fallacies and red herrings that have nothing to do with what we're talking about.
If we try to steer the ship back to the topic at hand...here's why we should be concerned that Europe's private sector isn't growing much or innovating much.
It turns out, Europeans entire way of life is funded by taxing the activity of the private sector and redistributing that money to things like healthcare, education, pensions, etc. Innovation (increased productivity) is the only way to reliably grow this pie, and innovation is exclusively the domain of the private sector due to the competitive pressures of markets.
If our private sector is entirely composed of aging industrial-age conglomerates waiting to be disrupted by more dynamic and innovative Chinese competitors (China is rapidly becoming better at the things European industrial companies used to dominate), our entire society is at risk. Militarily, we're sitting ducks, and economically, we are as well.
Modern Europe is economically heading the way of the Soviet Union, with an increasing share of GDP driven via centrally controlled government spending (we're now at over 50% on average in the EU, the Soviets were around 70-85% at peak).
Meanwhile, The Chinese Communist Party has ironically created one of the most dynamic, capitalist systems on the planet. The Chinese supposedly "communist" economy is in fact more market-driven than even the US economy (33% government-driven vs 36% government-driven), and you can see this in the numbers: https://www.imf.org/external/datamapper/exp@FPP/USA/FRA/JPN/...
It doesn't take a Phd to understand that a much larger and more unified population in China, with a more unleashed private sector, is going to eat the lunch of the smaller, disjointed micro-economies in Europe. And this doesn't even factor in the rise of industrial investment in the US in recent years.
China may be market-based, but does China actually allow successful entrepreneurs to actually retain the fruits of their successes, or are those fruits confiscated in ways unrelated to taxation? Look at Jack Ma, for instance.
This is why the rule of law is so important. It's a Maslow's Hierarchy type situation, and if the choice is between creating value in a system which will tax a good proportion of it away (current EU) and creating value in a system which may capriciously confiscate it (current China) then I argue that people are more incentivised in the first case.
1 reply →
Great analysis. I will disagree with your last point though. The intangible remains; China is not an open society by any means, and its companies are under gov surveillance (just look at DeepSeek). I met a very smart man at a conference a few weeks ago. We were discussing evs in China. His response was he wants to stay in the US and does not use DeepSeek due to its surveillance. He feared if he visited China he would get in trouble. This transcends my anecdote. Private companies operating under oppressive regimes will not prosper. The chains of oppression are not to be underestimated
> innovation is exclusively the domain of the private sector due to the competitive pressures of markets.
You are able to read this very comment (and write your own) in large part specifically because of public-sector innovation.
2 replies →
This is a logical fallacy and a red herring that has nothing to do with what we're talking about.
I say "GDP doesn't matter that much" and you pivot back to how GDP isn't growing and that's a problem.
You say the future will be like the present except that China will replace the USA in the position the USA currently occupies. So what? The present is pretty good.
You say that the USSR is when the government does stuff and that's really bad. That's going to need more evidence.
Funding is a way of keeping track of the things that are done, not a way of doing things. Different economies put more or less importance on the accounting and more or less importance on the actual doing. Facts about funding cannot be conflated with facts about actual doing, especially in economies that are more likely to override the funding if they don't like the way the funding is causing doing. (That's something like what the "government fraction of GDP" is - it's the percentage of times the people didn't like the free market results and chose to override them)
But if that is true, why does the EU actually has almost double the entrepreneurs per capita the US has, as I have linked?
> Having to move the goalposts to the 1850s to make a point about relevant European businesses should be alarming to you.
Please actually have a look at the EU list and click through to the companies. They are all directly linked in Wikipedia. The majority is from the 1980s and younger.
I wasn't convinced of this, so I asked ChatGPT to give me the founding dates of the top 10 companies from the Wikipedia page, with an instruction to track backwards through M&A. Here's the result:
* Volkswagen: Founded on May 28, 1937, as Gesellschaft zur Vorbereitung des Deutschen Volkswagens mbH, later renamed Volkswagenwerk.
* Shell: Formed in April 1907 through the merger of Royal Dutch Petroleum Company (established in 1890) and The "Shell" Transport and Trading Company (founded in 1897).
* TotalEnergies: Established in 1924 as Compagnie Française des Pétroles (CFP).
* Glencore: Originated as Marc Rich + Co AG in 1974.
* BP: Incorporated on April 14, 1909, as the Anglo-Persian Oil Company.
* Stellantis: Formed on January 17, 2021, from the merger of Fiat Chrysler Automobiles and PSA Group. Fiat Chrysler Automobiles was established through the merger of Fiat S.p.A. (founded July 11, 1899) and Chrysler Group LLC (originally Chrysler Corporation, founded June 6, 1925). PSA Group was Established as Peugeot Société Anonyme in 1966, but its roots trace back to Peugeot's original founding in 1810 as a family industrial business.
* BMW: Traces its origins to Bayerische Flugzeugwerke AG, established on March 7, 1916.
* Mercedes-Benz Group: Resulted from the merger of Benz & Cie. (founded in 1883) and Daimler-Motoren-Gesellschaft (founded in 1890) in 1926.
* Électricité de France (EDF): Established in 1946 following the nationalization of France's electricity sector.
* Banco Santander: Founded on May 15, 1857, as Banco de Santander.
We could do the full list and then weight by revenue or something but broadly, I think the point that 'pembrook is making is proven.
As an aside, one feature of LLMs that I genuinely do enjoy is the ability to ask for intern-level research like this.
[flagged]