The Paradox of Europe’s Pioneering Technology Regulation

This is a very interesting perspective: Europe has been out-competed in the domain of digital technology by China and the United States. Yes, if you look at the top 20 digital platforms and broad modern technology companies, nearly all of them are controlled by China and U.S. Yet, there is one area that Europe is doing well and innovating, ahead of everyone – Regulation. Interestingly, the investors are saying that the pioneering innovation on regulation which Europe is leading in the world is the very reason they do not want to pump money into the continent because they want to operate in places with lighter regulations.

I will call this The Paradox of Europe’s Pioneering Technology Regulation and it is explained this way: Europe is a modern digital technology innovator on regulation, but as it advances in that domain, investors and entrepreneurs will find the region increasingly not-appealing, and that construct will keep Europe further behind, even though the Europe-anchored regulations like GDPR are becoming benchmarks for other regions of the world. 

Certainly, the world buys something from Europe on technology-regulation. But that may not be the only thing Europe wants to sell. Yes, it would also like to sell services and products in the ways Google, Facebook, Alibaba and Tencent are doing globally.

The mood in Europe is gloomy, and it has nothing to do with Brexit (or the dreary weather). Over and over at the Fortune Global Forum, which concluded earlier this week in Paris, Europeans lamented their continent’s lagging performance in the digital economy. Globally dominant tech behemoths hail almost exclusively from the United States and China, much to the chagrin of Europe’s policymakers and business champions.

“We missed the boat,” said Prince Constantijn van Oranje, a member of the Dutch royal family and a proponent of Europe’s technology community, speaking on a panel about Europe’s “Silicon Valley,” which doesn’t exist. Europe has the smarts and the wealth and the market to be a tech leader. As Constantijn pointed out, the continent was a leader in GSM, yesteryear’s mobile-phone standard. What it needs now is a more vibrant entrepreneurial and venture-capital culture.

Instead, Europe has innovation in a less-than-helpful area for entrepreneurs: regulation. A trio of European regulators disagreed with the assertion, but there’s no escaping the fact that Europe is pioneering data protection with its landmark GDPR requirements even as it lags in digitalization. (And under the expanded powers of the European Union’s top digital regulator, Margrethe Vestager, the continent is about to double down on the former.)  Said Constantijn: “We shouldn’t put ourselves on the back foot too quickly on GDPR. We should have much more flexible regulation.”

Regions with less mature regulatory regimes might make for better investments. Andre Maciel, a Brazilian managing partner in Softbank’s $5 billion Latin American fund, says he is focused on Brazil and Mexico, two markets with tech-savvy young consumers and better-than-average growth opportunities. And lightly regulated labor markets. (Fortune newsletter).

Yet, do not miss the fact that everyone is working hard to stay relevant. Monday could be the day Uber ends its service in London, UK, if the city’s transit authority fails to grant the ride-sharing pioneer a new long-term license. As that happens, the troubled WeWork will ask 2,400 employees to depart this month. That is about 20% of its workforce.

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