Instead of being created, ChatGPT is regulated throughout Europe. There is reason to regret that. The early findings of the arms race in artificial intelligence may be insane, but they serve as yet another illustration of how far behind the US and China the European Union is in terms of technology.
How did the region that gave rise to Nokia Oyj and Ericsson AB turn into the region that technology ignored? Although the Googles of the world appear to be considerably more alarmed by ChatGPT than any EU fine, others attribute the problem to the acronyms associated with Brussels red tape: GDPR, DMA, and DSA. Tech lobbyists are furious with EU Commissioner Thierry Breton for calling for tougher AI regulations to control a new generation of chatbots.
Atos SE, though, might be a better illustration of the deeper ailment afflicting European technology. Champion of the aerospace industry Airbus SE has suggested investing in Evidian, the cybersecurity and big data division that Atos intends to spin off this year. The proposed agreement has been promoted as enhancing European tech “sovereignty” through fostering the development of cloud and cutting-edge computing.
Atos is not a solution to Europe’s IT collapse, but rather one of its symptoms, as evidenced by the share price of the business. With acquisitions, the company more than doubled both its revenue and its workforce in the 2010s, but it moved too slowly to the cloud and away from outdated IT infrastructure. Microsoft Corp. and Alphabet Inc., two companies vying to put chatbots with personalities in every home, spent a ton of money expanding their own cloud businesses. These two companies, along with Amazon.com Inc., now control two-thirds of the global market.
Here, the disparity in R&D between the US and Europe seems important. According to data from the European Commission, Alphabet and Microsoft were two of the top three global corporations in terms of research expenditures in 2021, spending almost $30 billion and $23 billion, respectively. Volkswagen AG, the only corporation from the EU to make the top 10, spent 15.6 billion euros ($16.6 billion). Atos and Airbus both lagged far behind with 2.9 billion and 57 million euros, respectively.
Governments may believe that assembling ever-larger domestic or regional champions will be sufficient to close the gap. Yet, efforts to create a “European cloud” have not been very successful.
In a new book about Europe’s technological gap, former Atos executive Olivier Coste argues that the high cost of failure in the EU—in the form of corporate restructuring—is the underlying problem. Unlike in the US, it costs several hundred thousand euros to lay off an engineer, takes time to negotiate, and demoralizes the remaining employees. That, in his opinion, discourages taking chances on tech projects that have a high failure rate. It also explains why industrial enterprises from the 20th century, which excelled at gradual rather than dramatic innovation, outspend 21st century technology in the EU.
Reduce the expense of failure, according to Coste’s advice. He suggests a “flexicurity” strategy for tech jobs, a la Denmark. This would result in increased hiring and firing flexibility, balanced with a safety net of sufficient money to safeguard those who do lose their jobs. His opinion is far from universal; others, such as the US Defense Advanced Research Projects Agency, or Darpa, advocate for more disruptive innovation. Paying European researchers more would be an alternative solution.
Clearly, the recent wave of layoffs in Silicon Valley following a pandemic of overhiring is not a model to follow. Yet, Atos isn’t exactly in a good spot either. It has put off restructuring and now requires an increase in finance of 1.6 billion euros through 2023. That amount is essentially equal to its current market capitalisation, which is embarrassing for a company with a 2017 valuation of 13 billion euros. Even the Evidian separation may not be the wisest course of action given the growth prospects, according to Tamlin Bason of Bloomberg Intelligence.
It’s not all bad news, though. Recent initiatives like the 3.8 billion euro venture capital initiative from the European Investment Bank could speed up investment and innovation. But, it’s difficult to avoid having flashbacks as Europe defends its cyber-industrial complex while controlling chatbots. Politicians’ only option now is to demand a “European ChatGPT” – at least until the next great thing appears.