EU Unicorns – No Thanks

EU is hoping that we can create unicorns. It can be much more valuable to have a higher number of smaller, more specialized companies, whose systems are interoperable in stead of promoting a company culture who is mainly growing by aquiring others and swallowing users in a closed platform. Instead, we must work to ensure that the EU becomes an API, interoperability, cooperative database and IT-law common market.  

by Torsten Arendrup. He is a former member of the governing body at COOP Denmark (a huge supermarket chain formed as a cooperation) and founder of COOP Garage.

In early NovemberEuropabevægelsenDanish non partisan members organisation supporting EU together with Dansk Industri, Confederation of Danish Industry invited to a mini-EU-summitThe Danish European Commissioner for Competition, Margrethe Vestager introduced the debate of two of the most hot EU issues: the green transition and digitalization.  

I participated and subsequently participated in debate 2: Should the EU regulate the tech giants further? Both in Vestager’s speech and in the debate, it was mentioned that the EU should have more unicorns and that we are falling behind, because of the dominance of the Unicorn from the United States and China. 

I would like to propose that the mental focus should be changed: We should not aim for the EU to foster more unicorns. A unicorn is a term in business world to indicate a privately successful startup company valued at over $1 billion. But setting value and growth as targets is not valuable for EU. It can be much more valuable to have a higher number of smaller, more specialized companies. It increases competitiveness and values than just money can come into play. 

Instead, we must work to ensure that the EU becomes an API, interoperability, cooperative database and IT-law common market.  

If we do that, there may also be unicorns, but in this case unicorns, based on EU values and they will be standing on the shoulders of EUs long-term ideas and values. 

Acquisitions Have Built the Giants
We are in the EU subcontractors to the American software giants. What is special about Google, Facebook, Amazon Web Services, AWS, is that they are largely made up of products, knowledge and market that have arisen through acquisitions, including many companies from Denmark and the rest of the EU. They are only partly created by organic growth. Here is shown how Google has built up its services through acquisitions: 

 

Google’s products and services are the result of the acquisition of over 200 independent IT companies and thousands of employees. 

It is clear from the recent US report “Investigation of competition in digital markets” that the giants have swallowed hundreds of companies, including several unicorns. It is bad in so many ways: The culture and values of individual companies are assimilated, creativity is hampered, competition in individual sub-areas disappears, competitors in spe are killed and the giants become too big to fail. Legislating and regulating is a problematic area, but Vestager says that countries’ competition authorities will keep an eye on takeovers and look at perspectives from a European perspective. It’s certainly a start.  

If we in the EU have the mindset, that we need more unicorns, then the EU will continue to be an incubator for potential acquisitions of the tech giants. Even if they “only” acquihirebuy the company to get the people, it is harmful to the EU. 

AWS is an example of the IT giants annexing Open Source, which is positive, but in practice their marketing machine makes the chosen open-source technologies branded as AWS. This means that the sustainability of the open-source system itself is at risk, many of the developers of open-source software live off consultancy work related to the products and will be outcompeted by AWS. 

The EU as One Platform
If the EU is instead seen as one software platform, because of the opportunities for systems to work together, we will be able to grow quickly, maintain know-how, improve technical competition – and work on common values. As Vestager puts it: “countries are suppliers, subcontractors and customers to each other in a cross-border way.”  

Technically, an EU Tech Giant will consist of a solution where a company chooses a total solution based on a palette of components, solutions from different suppliers: 

By mixing & matching, the solution becomes more customer and solution oriented. If a component supplier does not develop, it can be replaced while retaining the components that are satisfactory. With the current tech giants, it is difficult to make a similar type of solution, although it can be done, it is not with their good will: They want to immerse users in their environment (Microsoft is good example of this strategy). 

There are many advantages of being able to position the EU as a tech giant: the global success of GDPR can be followed up with generic solutions for managing citizen consensus to data sharing, API’s, cooperative databases, a digital culture, and digital formation etc. 

EU published in February 2020:” A European strategy for data.”  It is explicitly stated: ”The Commission’s vision stems from European values and fundamental rights and the conviction that the human being is and should remain at the centre.” Individuals should benefit from technical tools and standards that make the exercise of their rights, in particular their right to data portability, simple and easy. This would also enable novel data flows, protect consumers, and foster competition. Secure and universally usable digital identities are also crucial to enabling individuals’ access to and control over their data and here Denmark already have unique experience with the NemID- and CPR-systems. 

European companies can still become unicorns but can achieve the larger goals through cooperation. It also means that they are not forced to sell their companies, merge or to try to develop components that are outside their areas of competence. 

About cooperative databases: The concept of sharing data across companies and people is known from Danish agriculture. Working with common databases, transparency, data reuse, peer-review, etc. In Denmark, we have a long tradition of sharing data, such as GIS data. The fact that it is a common database also adds professional legal and security focus.  When Vestager mentions that the EU is focused on developing standards for data transfer – and ensuring they are followed, my view is that we are off to a good start, effective and positive for this concept. 

About the EU and cloud: It’s a great idea to have a Europe-based cloud industry (Gaia-x). Especially after Microsoft lost the case for the disclosure of data from the EU to the US – they had created a “poison pill” by setting up a German company which was therefore not accountable to the US Government. Unfortunately, it takes time to set up cloud data centers to be built and purchase hardware in large scale. The big players AWS, Google, Apple, and Facebook own or have existing agreements with factories that supply servers and other equipment – it’s an infrastructure no one in the EU has yet. While acquiring that expertise, get agreements with subcontractors, etc., I believe that legal work needs to be done: it is important for the EU to stop that the US can legally require US companies to provide data, even if it is EU subsidiaries that handle data (and that data does not otherwise leave the EU). 

See it here (in Danish)

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