Understanding the geopolitics of tech ecosystems
The perspective from a French tech entrepreneur in Paris
Originally published in French on Umanz.fr (September 16, 2019).
We have entered the era of “State Enterprises”. At a time when the GAFAMs surpass the UK economy and when countries like Denmark open diplomatic representations in Silicon Valley, it is time to take stock of the geopolitics of the various tech ecosystems.
What room for maneuver can we have against GAFAMs and BATXs? What sovereignty or positive outcome can we expect in an interdependent world? Yann Lechelle, active member of the French tech scene as a co-founding member of France Digitale, co-founding member and board member at HUB France IA and advisor to the executive committee at JEDI, but also COO at Snips (Deeptech specialized in AI) has agreed to answer Umanz’s questions:
Umanz: What can we observe about the difference between the various tech ecosystems?
Yann Lechelle: The first principle to accept is that a technological ecosystem is constructed over multiple generations. However, the information technologies available and used by everyone on a daily basis cause great impatience among individuals, governments and corporations to have a local technological ecosystem at the very forefront of the world’s best.
The duration of an entrepreneurial generation can be similar to the lifetime of a venture capital fund, around 7 years. Silicon Valley is an ecosystem that has already been in existence for ten generations of entrepreneurs and investors who have been involved in each wave of expansion, while in France we are at most in the 3rd generation of Tech entrepreneurs after Bernard Liautaud and Denis Payre of Business Objects, the Marc Simoncini, Xavier Niel and Jacques Antoine Granjon wave and finally the most recent wave initiated by Jean-Baptiste Rudelle’s Criteo or Frédéric Mazzella’s BlaBlaCar.
But despite the ripple effect of these three generations, a limited number of entrepreneurs have been able to benefit from “end-to-end field learning” — the only and best way to transform the experience into ROI — and from enough capital to accelerate the ecosystem. The investment funds themselves are just starting to invest in their support scheme for start-ups; for example, Serena Capital is one of the too few “venture capitalists” in France to include Operating Partners who help portfolio companies to avoid the pitfalls, grow faster and more effectively.
Umanz: Is there [in the EU] any room for maneuver between China and the US?
Yann Lechelle: These two economic leaders have developed powerful and fast technological ecosystems. For them, this is becoming a first-class economic weapon.
Silicon Valley is a machine that is organized to create champions. In the United States, the society generally accepts that financial success brings social good. Zuckerberg is brilliant but it was Silicon Valley that made Zuckerberg. Because of the very structure of Silicon Valley, there would have been a Facebook powered by West Coast finance anyway.
We don’t understand Silicon Valley until we understand that Americans don’t create companies to do harm (or good) but to create champions from the very beginning to succeed. This is particularly true for software, which offers long term margins close to 100%. Marc Andreessen said in 2011 “Software is eating the world”: this is a typical Silicon Valley point of view, and especially true for its potential to generate a monopoly rent.
In France, there were AirBnBs before AirBnB but we did not create AirBnB. The Californian financing machine has invested a total of nearly €4 billion in this company by giving the tools to a man called Brian Chesky. To put it into perspective, the thousands of French start-ups, together, raised that same amount in 2018, collectively. Divide this figure again by the number of competitiveness clusters across the territory [France], and the comparison becomes ridiculous.
China still operates differently, but with unprecedented momentum and inertia. Bringing together a billion people through artificial intelligence and facial recognition will give Chinese economic players an accelerated education on these technologies, an acceptance of their uses and eventually an integration into a range of business processes.
The French and European ecosystems do not have the same speed as their American and Chinese cousins. Similarly, the conditions and the size or fragmentation of the market and therefore the level of business are not as favorable. Also, our benevolent regulation, such as the GDPR, acts as a brake on the adoption of certain technologies. However, the aeronautical ecosystem around Toulouse has proven that with political will and commitment, but also a lot of budget, it is possible to create champions.
Clamoring the number of unicorns or boasting at ever increasing fundraising rounds will not be enough; it will require an alignment of political will, local and foreign capital, and all economic players for our small start-ups and SMEs to become powerful and sustainable mid-cap companies.
The notion of room for maneuver does not make sense in digital ecosystems; there are only gaps that are widening or narrowing.
Umanz: What to do to avoid ending up as a small GAFA or BATX colony?
Yann Lechelle: Let’s play a game of What If. As our [EU] states are increasingly indebted, what if the GAFAMs were to become supra-national superpowers, with somehow opaque governance allowing them to experiment with radical yet below-the-radar innovations? What if they were the ones who would imagine the future of the human race? After all, haven’t states finally reached their limits as political structures organized around borders? In this dystopic What If, one would belong to the Google Federation which protects you from bad weather and will allow you to colonize Mars when the Earth is completely devastated…
But today no one in France wants this scenario where we would become a colony and a museum, where children would be 100% spoon-fed with North-American culture and mentality. Americans from the US of A are our friends and allies, and the GAFAMs are doing a remarkable job, but a balance must exist between abandonment, dependence, sovereignty and free will if any. That’s why it’s interesting to think ahead about our behaviors as consumers and decision makers, and seriously consider what our [EU or French] local ecosystem of businesses and merchants would look like in the long run if we were to make 100% of our purchases from Amazon (including prescription drugs, clothing, fresh produce, home purchases, insurance…).
It must also be realized that an uncontrolled brain drain is not part of a desirable future. What will France look like tomorrow if most of the entrepreneurial talent goes to the West Coast of America? Who will remain, or rather who will have the means to leave a country whose GDP per capita is systematically decreasing and whose foreign trade balance is sinking into negative territory?
To avoid this worst-case scenario, cooperation with our start-ups must not remain confined to the innovation departments of large companies. The barriers to adoption of local technologies by large local companies must be removed. In addition to supporting the financing of our innovation, the French Investment Bank (BPI) is one of the few institutions to work on this fundamental subject, a positive sign that shows that our leaders have understood the importance of this issue, since the pigeon episode and thanks to the excellent work of the France Digitale association.
Umanz: What is the role of artificial intelligence in the geopolitics of technological ecosystems?
Yann Lechelle: Artificial Intelligence is just another way of programming to solve problems rooted in big data. It only increases the efficiency of the software on problems that could not be solved beforehand.
In terms of AI, Europe is theoretically in the race because we are quite good at applied mathematics, but the amounts invested are still lower than our major rivals even if we catch up with a promise of €20 billion. Let us remember that only two years ago the whole of Europe invested 7 to 8 times less than the GAFAMs in AI.
Although this is a good start, the Villani Report promises €1.5 billion for artificial intelligence by 2022. China has already invested $13 billion in artificial intelligence since 2016 and $2 billion in Beijing alone. For its part, the United States invested $35 billion in AI in 2019.
That being said, the game over AI isn’t over. Certainly the American and Chinese behemoths have a lot of data and data scientists, but tomorrow, a large number of bricks and tools will be available off the shelf, with “post-data” models ready for use. This will then be the era of AI exploitation by project managers, who must be trained today in future uses and opportunities.
In addition, there is an opportunity to create an AI and technologies that honor our European values, which are the Enlightenment values enhanced by post-war idealism. We must therefore seize these tools to resume the race, another race. Trading performance for privacy. Trading quantity for quality. Trading the economy of attention for the valorization of concentration.
Umanz: What can be the attitude of states?
Yann Lechelle: As they loose momentum in the pools, moderate political parties are trying to preserve a societal status quo without offering citizens a desirable future while our Western societies have reached their asymptotes, a local maximum as data-scientists would say! Our states and the majority of our citizens, especially the millennials, would therefore be losing resonance according to the theory of Harmut Rosa, a German sociologist and thinker of late modernity.
What makes us French or European? One thing is certain: we have a different history from other major countries or continents, so we must rely on our strengths and what makes us different. For example, we can differentiate ourselves from the experimental attitude of Silicon Valley, which considers that “Anything that is not illegal is moral”… In Europe, we all have these two distinct notions of illegality and morality; we reflect, we procrastinate, we are also more tormented, it is the consequence of our history, which is also tormented.
We also have more complex and sophisticated consumers, between the United Kingdom and Greece, between Italy and Finland. This is an opportunity because we are prepared to understand European consumers better than American and Chinese companies, which are oriented solely towards financial performance on the one hand, or a uniform model on the other hand.
Just as American hegemony has not totally succeeded in imposing fast food in Europe, we might be well advise to prevent platform dependency and bulimia. We should study Tim Berners Lee’s criticisms of his unfinished work, listen to our friend Tariq Krim, who talks to us about the Slow Web, and not assume by default that a tablet for everyone at school will guarantee our children’s future.
Emmanuel Macron highlighted this problem with the concept of Renaissance. I think that in Europe, a Digital Renaissance can and must integrate the enlightenment values (Les Lumières) while the unrestrained digital import from the US or China threatens to overshadow us.
We could readily link this Renaissance 2.0 to a benevolent European project and vision. This Renaissance would go beyond an ever-late regulation that imposes symbolic fines. It would be a positive digital boost. In this respect, Tech for Good and its cousin AI for Humanity are unprecedented opportunities to integrate the enlightenment values into digital technology.
The PACTE law [in France] is a good start and a positive trigger for an intellectual renaissance injected into the economy. The question of the raison d’être, which opens up the field of why, is also a philosophical question.
Another boost would be to reactivate an European small business act. And France can be a pioneer in this field: without falling into the caricature of “buying French or European,” I am thinking, for example, of an incentive scheme where large companies would be classified in evolution of (relative) purchase quantities from local SMEs and tech start-ups : this could strongly feed a virtuous circle and strengthen local players.
The notions of purchasing power, job security or even tax cuts are often brandished individually, by demagoguery: but no one is fooled and there is no enchantment in this, and especially losers with each promise. Implementing an economic and social resonance to find meaning therefore seems relevant: horizontal resonance at work between colleagues and vertical resonance to find our place and feel at home in the global society.
Umanz: What can be the attitude of large companies?
Yann Lechelle: They need to play along the bigger picture, take the innovation department out of its silo because the current situation in France is extremely frustrating for start-ups. The innovation department is a French exception, and no one should envy us. Today, it is the CEO who must be in charge of innovation, as well as every project manager throughout the organization, not a separate entity altogether, it is inefficient at best.
As Eisenhower did in the US when he decreed “think small”, we must rekindle the small business act in France and Europe: institutions and large groups must trust SMEs and start-ups, provide capital, buy, integrate innovative SMEs, let employees become entrepreneurs or intrapreneurs… In short, inject flow and remove stock in terms of HR.
Today, all major groups should want Europe to be in the race to offer healthy competition to China and the US; offer products and services that incorporate values that are neither Chinese nor American, take inspiration from South Korea, which, despite its nimble size and economy, harbors an impressive digital sovereignty.
I am concerned about the place of France and Europe in these geopolitical issues, and concerned when a prominent Chinese investor, Kai-fu Lee, says that there is no hope for the artificial intelligence sector in Europe. It is in this context that I joined the JEDI (Joint European Disruptive Initiative), whose objective is to create an innovative entrepreneurial momentum around major technological challenges with high societal impacts, based on a methodology proven by the ARPA (Advanced Research Projects Agency). Unlike traditional scattered financing approaches, this methodology proposes to massively stimulate a sector via a few well-targeted and long-term supported players with a commitment to resources rather than results, an approach that is non-conformist but complementary to the dominant financing models.
I have great hope in the specific capacity of Europe and Europeans. I have great hope because I see every day ambitious young generations who think globally from the very first day. If they have been educated in France or Europe, then it is our culture and values that they will export, and that will merge with other vital sparks around the world.
It will take patience and two or three generations of start-ups to see the future champions and the first enlightened European unicorns. It is up to all of us to support them.
