Europe, Tech and War

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Olivier Coste: Why There Is No French Google

Entrepreneur and investor Olivier Coste left Paris for New York City in 2014, having worked as an advisor to Prime Minister Lionel Jospin and held positions at the European Commission and French telecoms giant Alcatel. The author of last year’s self-published book Europe, Tech and War explains the reasons for his departure, how France has missed the tech revolution, and the ways it could still correct its course.

By Guy Sorman/ September 5, 2023

France-Amérique: You have occupied every key position within the tech sector in France, including in government, in a major international company, and in start-ups. You then moved to New York City. Was this due to disappointment?

Olivier Coste: It was due to necessity. I am a strong supporter of European integration, and I have spent five years working towards it. But in the tech world, the customers capable of taking risks and launching innovative technology are in the United States. To get our French start-ups off the ground, I had to move closer to our customers.

Two industrial revolutions took place between the 18th and early 20th centuries. The first was brought about by the steam engine, and the second by electricity and the internal combustion engine. Yet Europe, and particularly France, missed the third – the tech revolution. Why?

Firstly, there were the two world wars. Then, between 1945 and 1975, we caught up with the technological level of the United States. But the first oil crisis, which began in 1973, led to Europe introducing laws to control layoffs, for legitimate reasons. Over the last 50 years, these laws have had a devastating effect on Europe’s ability to make high-risk investments, and therefore to produce groundbreaking innovations. As a result, Europe has missed out on the third industrial revolution. But there is nothing fatalistic about this; it is still possible to make it to the forefront of tech.

Artificial intelligence is all anyone is talking about, and is being described as a huge transformation. Do you take a more measured view of this innovation?

Quite the opposite, in fact. Much like previous industrial revolutions, AI will upturn every sector of the economy. Tech and AI will transform education, automobiles, healthcare, politics, warfare, and more.

China and the United States are the only two main players in the tech sector. Is China simply catching up with the U.S., or is it producing authentic innovation?

China is putting out real innovation. Since 2007, Huawei has been ahead of all Western telecoms players. Chinese messaging service WeChat is also well ahead of the American WhatsApp, and the Chinese social network TikTok is ahead of Facebook and Twitter. The United States is deeply concerned about losing its technological leadership, and is using the same Cold War policy as it did when dealing with the Soviet nuclear bomb in 1949.

Why is this Chinese-American duopoly so concerning for the French?

European citizens and consumers have been dependent on American technology for decades. In the words of Louis Gallois, former CEO of Airbus and SNCF: “Europe is a digital colony of the United States.” This situation is widely accep- ted as the United States is a democracy, a constitutional state, and a geostrategic ally. But becoming a digital colony of China is now a credible possibility, and would present Europe with political and economic problems of an altogether different nature.

Particularly in the cloud?

Across the entire digital value chain. It would affect semiconductors, data, the cloud, and artificial intelligence, and in the future, quantum computing and the consumer and industrial applications of these new tools.

Do you think that a European tech market stands any chance of competing with the U.S. and Chinese giants?

The tech market is global. You can sell semiconductors, software, or cloud services without transport costs or customs duties, with the major exception of China. Those who lament the fragmentation of the European market would do well to look at the success of Israeli, Taiwanese, and Korean technologies, which are booming even without significant domestic markets.

The main thing standing in the way of a credible French sector, supposedly, is our social welfare system. It makes it impossible to restructure companies, while tech requires flexibility, risk-taking, and agility. However, wouldn’t you say that the welfare state, created in France in 1945, has led to a more viable society than American capitalism or Chinese authoritarianism?

Yes, there is an essential obstacle relating to a small section of the French Labor Code – layoff law. But this barrier to tech has nothing to do with the welfare state that emerged from the Front Populaire and the Liberation. The welfare state and the European social model are rooted in free education, free healthcare, unemployment benefits, and pay-as-you-go pensions. This is all perfectly compatible with an innovative economy at the forefront of technology! There is no need to change the welfare state, the European social model, or even job protections for the least qualified. And there is no need to copy the American liberal or Chinese authoritarian models.

Europe is a world leader in public research and development, tech subsidies, and private investment in mature industries. On the other hand, it invests between five and seven times less than the United States in private R&D in the tech sector. The reason for this specific gap is that restructuring costs in large groups make high-risk tech investments an absurd choice. Tech is volatile and unpredictable. If the road is winding, with no visibility, and you can’t hit the brakes, you’re never going to accelerate. This is the main reason for the absence of a European Google, but also for the low level of funding for start-ups.

You do not seem entirely pessimistic about France or Europe. Do you think that it is possible to strike a balance between current labor laws and the risk-taking required for a successful tech sector?

We are proposing measures that would preserve the European social model while restoring the profitability of investments in Europe’s tech sector. The Danish social model is an interesting example. Another idea would be to remove layoff constraints for employees above a certain salary threshold – one that is typical for tech engineers. This type of measure is needed to bring in the hundreds of billions in R&D investment currently going to China and the United States.

That’s a good point. But is anyone listening?

Everyone, and closely! While Europe’s sluggishness in this area is common knowledge, the analysis of the root causes is both new and convincing. But who is prepared to take up this subject while everyone is worried about pension reform? We need to give ourselves time, at least in France.

We are almost at war with Russia, and we should hope to avoid a military conflict with China. Would you say that whoever dominates the tech market would gain the upper hand in a war?

Yes, and there are many historical examples to back this up. For both China and the United States, the keys to supremacy are armed forces and mastering technology. These two world powers are preparing for a potential war, which would start in Asia but could easily spread elsewhere. It would not be absurd for Europe to prepare for it too. Si vis pacem, para bellum.

Europe, Tech and War by Olivier Coste, self-published, 2022.

Interview published in the September 2023 issue of France-Amérique. Subscribe to the magazine.

GUY SORMAN

Guy Sorman is a prolific writer and essayist for a number of French and international newspapers, and is currently the editor-at-large of France-Amérique. He splits his time between France and the United States, where he used to teach economics. He has written many books about America, including Made in USA: Regards sur la civilisation américaine, The Conservative Revolution in America, and In Praise of Giving: Understanding the American Heart.

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