The EU is eyeing a new tech champion, but it’s not ChatGPT

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In Europe, ChatGPT is regulated, not invented. That’s something to regret. Confused as the early results of the artificial intelligence arms race may be, they are also another reminder of how far the European Union lags behind the US and China in terms of technology.

How did the country that gave birth to Nokia Oyj and Ericsson AB become the country that forgot technology? Some blame the acronyms synonymous with Brussels bureaucracy – GDPR, DMA, DSA – although the Googles of this world look far more spooked by ChatGPT than any EU fine. Tech lobbyists are furious with EU commissioner Thierry Breton, who wants new AI rules tightened to curb a new breed of chatbots.

But perhaps Breton’s old company Atos SE is a better example of the deeper malaise plaguing Europe’s tech industry. Aerospace champion Airbus SE has proposed an investment in Evidian, the big data and cybersecurity unit Atos plans to spin off later this year. The potential deal was presented as a boost to Europe’s technology “sovereignty” through growth in cloud and advanced computing.

A look at Atos’ share price shows that the company is a symptom and not a cure for Europe’s tech decline. The company doubled revenue and employees through acquisitions in the 2010s, but was too slow to move to the cloud and away from legacy IT infrastructure. Meanwhile, companies like Microsoft Corp. and Alphabet Inc. — the companies struggling to bring chatbots with personality into every home — have spent huge sums to grow their own cloud businesses and, along with Inc., control two-thirds of the global market.

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The R&D gap between the US and Europe seems relevant here. Alphabet and Microsoft were among the top three global corporate research spenders in 2021, at around $30 billion and $23 billion, respectively, according to European Commission data. The only EU company in the top 10 was Volkswagen AG, which spent 15.6 billion euros ($16.6 billion). Airbus was far behind with 2.9 billion euros, Atos with 57 million euros.

Policymakers might assume that all it takes to close the gap is to cobble together larger and larger national or regional champions. But efforts towards a “European cloud” have achieved little.

In a new book about Europe’s tech lag, former Atos manager Olivier Coste sees the real problem as the high cost of failure in the EU – in the form of corporate restructuring. Unlike in the US, firing engineers costs hundreds of thousands of dollars per person, takes time to negotiate, and discourages employees who stay. That discourages taking risks on technology projects with a high failure rate, he says. It also explains why 20th century industrial firms – better at incremental, not radical innovation – are outperforming 21st century technology in the EU.

Coste’s recipe is to reduce the cost of failure. He recommends a “flexicurity” approach based on the Danish model for tech jobs. That would mean more flexibility in hiring and firing, offset by the safety net of sufficient income to protect people who lose their jobs. He is far from a unanimous view; others propose more disruptive innovations, such as the US Defense Advanced Research Projects Agency or Darpa. Another idea would be to pay European researchers better.

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Obviously, the recent wave of layoffs in Silicon Valley following the pandemic override doesn’t look like something to emulate. But Atos is also hardly in a fixed position. It has been delayed with the restructuring and now needs 1.6 billion euros in additional financing until 2023. That number is basically its current market cap, an embarrassment for a company valued at $15 billion in 2017. And it’s not even clear that the Evidian spin-off is the best way forward given its growth prospects, Tamlin said Bason by Bloomberg Intelligence.

It’s not all doom and gloom. Recent moves like the European Investment Bank’s €3.8 billion venture capital initiative could accelerate investment and innovation. But it’s hard to shake a sense of déjà vu as Europe defends its cyber-industrial complex while keeping chatbots in check. Now all politicians have to do is demand a “European ChatGPT” – at least until the next big thing comes along.

More from the Bloomberg Opinion:

• How sentient is Microsoft’s Bing, aka Sydney?: Parmy Olson

• China’s ChatBot advantage may come from a dark place: Tim Culpan

• If AI ever becomes sentient, she’ll let us know: Tyler Cowen

This column does not necessarily represent the opinion of the editors or of Bloomberg LP and its owners.

Lionel Laurent is a Bloomberg Opinion columnist covering digital currencies, the European Union and France. He was previously a reporter for Reuters and Forbes.

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