Can Europe build digital sovereignty?

BBC-podcast on suurin edes koko ajan. Kaikaa Helsingistä Tallinan, katsotaariokset ja vara omasi, talliksi ja pistefi. Mikä on parempaa kuin hyvä A-BC ruoka? Tietysti se, jos syömällä voi voittaa itselleen viiden sadan euron arvoiseen hoteli-fiikonlopun. Herkuttele itseisi hoteliin. Vilauta S-etukorttiä kun ostat A-BC-en ja osallistut automatisesti viikottaiseen hoteli arvontaan. Sitten ei muuta kuin syömän ja nukkumaan A-BC. Mutta mitä on minun? Tämä on koko ajan. Oleta koko ajan, joten EU-uudestaan koko ajan. Tämä on johonnus, kun ei ole edes koko ajan, sysilio-reakap, associate professor in economics, ettei reiseksi, ettei luokon, instituut, innovatio- ja public purpose, ettei jonson, koko ajan, joten EU-uudestaan koko ajan, joten EU-uudestaan koko ajan, joten EU-uudestaan koko ajan. Stanipinio, kun on koko ajan, joten EU-uudestaan koko ajan, joten EU-uudestaan koko ajan, joten EU-uudestaan koko ajan, joten EU-uudestaan koko ajan. Kuten luokon, kun on koko ajan, joten EU-uudestaan koko ajan, joten EU-uudestaan koko ajan, joten EU-uudestaan koko ajan, joten EU-uudestaan koko ajan, joten EU-uudestaan koko ajan, palastess plans met schematic Wa minkälyt sk consonanti v tekij Ouritorkin kehimm哈哈 our connections to the internet, everything happens - in data centers that are not our own computers. We need to be connected to the internet - to even be able to open our files. But the cloud is more than infrastructure as a service. It's not just a place where we store files - or a place where the AI models are trained. I often describe the cloud as a test code - or a science-vary of digital technologies. Because, basically, every digital technology today - can be purchased as a service on the cloud. So, for data, models, and, of course, also infrastructure. And actually, if we want to delve deeper into what the cloud is - is something more than just a supermarket. Because if I'm thirsty, I go to Tesco, I buy a bottle of water - and then I leave and I start drinking the water. That water was produced somewhere else - of course, not inside the supermarket - and I'm consuming it less, say, on the street. Whereas the cloud is all of this combined. Everything happens together, which means that - we are consuming a service on the cloud - and that we are not just individuals, but also organizations - and even states, we all do it always inside the cloud. And this is why, also, adding to what Stan was saying - this dependence is particularly critical for Europe and the world at large. - Where is this? - That's a very good question. And actually, you asked it before - and I didn't answer it and I should - because it seems that it's nowhere, right? Because it seems that the digital economy is just about data - and intangibles, like algorithms, AI models - but actually this infrastructure, the data centers. They were historically primarily concentrated inside the US - and, of course, they're really China, because China is also a big player. But after the AI hype, after ChatGPT was released - these companies were starting and when I say these companies - I'm particularly speaking of the cloud giants - Amazon, Microsoft and Google, the three concentrate, for instance, - in the UK, almost 80% of the market - and in Europe, in the rest of Europe, it's around 70%. And very briefly, Stan, they're all American-owned. There are some European players, but the biggest players - by far are American ones. Part of the reason is it requires enormous scale, - it requires enormous resources to build these global networks. That kind of financing is more readily available in America - or sometimes in China than it is in Europe. Right, I think we'll dig into that a bit more in a moment. Seb Johnson, has Europe's reliance on US tech always been as great as it is now? It's grown dramatically over the last 20 years - America has been at the forefront of technological evolution - for the last 20 or 30 years. And I think with the new wave of AI technologies, it's got worse. You know, the model providers, AI, ChatGPT, Anthropic - the biggest AI companies in the world, all American. And so that reliance has grown and all of the technology that underpins AI - which is chips like Nvidia, that's grown, even energy. We're not very good at producing domestic energy here - so we're relying on foreign countries for energy. And like you say, the cloud providers and the data centers - we haven't done a good job of building them. And the UK is a terrible place to build data centers - because it requires huge amounts of energy - and ideally, cooler climates. So when we do build sort of sovereign data centers - which we are, we're actually building them in Norway. So, Nscale raised billions of dollars this year - one of the biggest financing rounds in UK tech history - all around sovereign AI - is being built in Norway in the Nordic countries - because it's much colder and they've got cheaper energy. So, we are more aligned on American technology than we have ever - have been, but I would emphasize we are trying to change that - and that is changing. And this is the first opportunity that I've ever seen - where we have this opportunity to be sovereign over - the next wave of technology. Stanik, can we just talk a moment about China? I mean, to what extent are we building any degree - of reliance in Europe on Chinese tech? Yeah, so if we are very dependent on the US for digital services - we are possibly getting that level of reliance on Chinese goods. So in the physical world, there is a growing dependency on China. If you look at solar panels, for example, we used to make solar panels - in Europe, particularly Germany. Basically, everything is imported from China now. If you look at electric vehicles, they will dominate - the European landscape within a decade or so. A lot of them are made by Chinese firms - and a lot of the critical minerals that we need to make everything - from defense, kit to just about anything else - come from China. And again, in the same way that we've seen Donald Trump try to leverage - those dependencies, China seems also to be keen to make its weight felt. And so they have rationed the amount of these critical minerals - that companies can get in Europe. That has really set alarm bells ringing. In Europe and at EU level, there have been plans to try and manage these dependencies. Seb Johnson, from the user's point of view, - you can take a very benign attitude towards this question of foreign tech - because we just use this. And insofar as it's useful to us, we like it. So can you tell us why this actually matters? Yeah, I think one of the big risks is economic growth, actually. When you look at the economic growth of the US over the last 20 years, - it's predominantly come from tech companies. In the last year, 80% of GDP growth in America came from data centers alone. In the UK, we're struggling with a lack of growth, stagnant growth. If you want growth, you have to invest in tech companies. That's the main engine for economic growth in the world right now. And so if we are not willing to build our own tech companies, - we're never going to see the economic growth into your point. The benefits of this new tech evolution get siphoned off to foreign countries. There's also big strategic risks. There's always the people who've been talking about the kill switch - and America has been willing to throw its weight around the technology that it has. The kill switch. So the idea that they could just shut off our technology, right? And could they theoretically shut off our access to the cloud? Stan, is there a really nice view in Europe about how much of a problem such dependency is? So traditionally, there have been two camps. One of them was the French camp. You could call them gollists. And they had this idea that Europe needs strategic autonomy and something that Immanuel Macron says a lot. And to kind of build independence from America and from China. And Northern Europeans with the Brits, when they were in the EU, but also Scandinavia and the Dutch, I've always been a little bit more relaxed about foreign dependencies. They made their fortunes by trading with the world and they want to keep doing that. But I wanted to pick up on something that Seb said about dependencies. Europe is a huge market for these companies. And the dependency kind of goes both ways. Yes, we need the likes of Google and Amazon and Microsoft and so on. But in many ways, they need us as well. So Europe, just by virtue of being a quite rich and very large market, is still very relevant to them. Yes, they're very attracted by China. They're very attracted by India and so on. But if you're looking for a very large, rich market, Europe is kind of it. And that's why maybe a surprising extent, they were willing to put up with a lot of European regulation. They want to be here. And again, really important point, which we want to do. take on board in more substance later. So, Celia, you wanted to come in. - Yeah, I wanted to come in because I wanted to emphasize that these type of dependencies that we're looking at are not just like, let's say, depending on a foreign company for the electric vehicles, as an example that was mentioned before. Depending on big tech companies, US and Chinese big tech companies for digital technologies, is depending on a few giants for the technologies that are used for governing our lives. And this is why it's important for users, but this is also why it's important for governments and companies because whatever you want to manage, whatever you want to govern, if you want to plan your own everyday life or you are a hospital and want to make the hospital work, you need digital technologies. And this is why this type of kill switch matters so much that even though it's true that Europe is a big market, European governments have been again and again, concealing to everything that these companies want. And the companies have been also pushing the European Union and the UK government to regulating the exact ways they want. And why do governments accept? Because governments are the ones that can be shut down. So really, even if I also believe that it's highly unlikely because of the relevance of their business here, that an Amazon Microsoft or Google will exercise their kill switch, the existence of that kill switch gives the companies and the US government a lot of bargaining power. - So there's a very interesting game being played here. Can we just stand for a moment look at one aspect of it, which is that when a large American tech company, let's say one which is very big in social media, I mean, another aspect of this might be monopoly practices, but let's say it's a social media problem. And a government says, well, look, we can't have this because actually our young people are being damaged. We don't like the algorithms that you're using. How far is what's happening in Europe motivated by the feeling that we just don't have that degree of control? - I think quite a lot. And it's not specific to Europe, by the way. The US has regulated TikTok, which was Chinese owned, because they felt that they didn't understand the algorithm and they didn't want an algorithm that was maybe controlled by foreign power to play a dominant part. And with the youth of America was seeing every day when they looked at their smartphones, Europe has the same concerns. We regulate maybe a little bit more deliberately, deliberatively, and the EU has imposed rules on platforms to essentially make it easier for states to understand what's going on under the hood. They have regularly find platforms for breaching the rules, for example, catering to children. And there is a kind of broad sweep across Europe, different countries in Europe in banning social media for young people, for example. It remains a permissive environment. It remains an environment in which American companies are welcome to play in, but it's maybe somewhat less welcoming than it was five years ago. Now, I take it American companies don't welcome these rules. They don't. I mean, for them, the EU is where you have the most intrusive regulation, especially since Donald Trump has come back to office and seems to be kind of on the same page as many in the tech community. So for you mentioned, antitrust, I think Europe is the place where you would most likely have an objection to companies merging, but also on regulating social networks and on regulating platforms. The EU starts from the principle that if you're very big, that makes you very powerful as a company. And therefore you have to behave in certain ways. That's why there are so many tech lobbyists in Brussels. And it is because they feel that that's the most restrictive environment for them at the moment. - Seb Johnson, can we go a little bit into the question of how this desire for regulation may have affected the capacity of Europe to create its own tech giants and companies? - Yeah, I think it's actually more of a cultural point around regulation. I think we've got this perception of ourselves, which is often I would say what's American propaganda that we're over regulations, we're crazy about it and that we don't allow innovation to happen. I think what that does is it creates a slow culture and an unclear culture for entrepreneurs and our founders. I actually don't think a lot of the regulation is bad. And to that point around TikTok, I think that's like the most blatant part of American hypocrisy that we've seen. America doesn't want Chinese algorithms to be able to influence their population, but when the EU says we don't want, we want to regulate X, they say, we're going to ban you from coming to our country. This is censorship and its finest, even though they're very happy to do that for TikTok. A lot of those regulations are not bad things at all, but what I know that founders struggle with and the tech community struggle with is that it hasn't been clear and it hasn't been quick. So the EU was very quick to try and roll out AI regulation before we really knew the capabilities of the technology and there were founders and entrepreneurs who were not clear on what implications this was going to have for their business and founders are now more global than ever. And if they don't have clarity on what it's going to mean for their business, they will just take their business to America, but there is clarity and there is no regulation. - Cecilia. - Yeah, I think that the story's way more complex. First of all, Europe started regulating when big-to-companies were already big tech, when the platforms were already there and they were changing a lot of the sectors in our economy, retail, entertainment, you name it, payments. So I wouldn't say, I think that this causality might be something that entrepreneurs say, but doesn't hold water when we see the numbers of all the startup companies that are created in Europe. DeMind is the heart of Google AI. DeMind was created in the UK and we can continue naming other AI startup companies, like for instance, Mistral or even Alev. These companies, and not only this is startup companies, but also universities, public research organizations, they are constantly producing frontier development, science and technology, and many of those are based in Europe, in the UK. And in my research, I can see clearly how, from the moment when big-to-companies started growing through their platform businesses, they started focusing on AI and doing, quote unquote, collaborations with all these organizations which effectively meant that they became a sort of satellite, a periphery of the heart, the core of the power in capitalism, which today are these big tech companies. So I don't think that is because of regulations, it's actually because there is no alternative. If today you have an AI company and you want to offer services, the only place where you can offer the services, is basically the cloud, and the same for every single digital company. So yeah, I would at least put that into a question mark. Stanley, there's a very interesting balance question here, which I'm having some trouble with. When we talk about how Europe ended up in a situation whereby we don't have the large tech companies, despite being a very significant market, has the problem been one of the rules and regulations, or has the problem been the one of Europe acting a sufficient scale, in other words, what the governments have done and what they and their relationships with big tech and what they have sought to procure. So I think it's both, to Seb's point earlier, innovation happens in Europe. What doesn't happen so much is the funding required to turn that innovation into mega companies, right? The next Facebook, Amazon's, and videos, and so on. If you look at the US, the US now has 10 companies with a stock market value of over a trillion dollars. The biggest company in Europe is worth about half of that, right? It's not even in the top 20 biggest companies in the world. There's a really kind of startling statistic, which is no company set up from scratch in the European Union in the last 50 years is worth over a hundred billion dollars. There are dozens and dozens of these companies in the US. Why is that? In part, its regulation, in part, it's European firms losing out to their US rivals, in part, it's lacking funding. But I think the overarching thing is firms in China and firms in the US in particular have access to a very large and unified single market. That means that if you're a firm in California, you can serve customers in Florida and New York, Michigan, and so on. That doesn't happen so much in Europe. We remain a fragmented set of markets, sometimes working quite well together, sometimes not working so well together. And if you're an entrepreneur and you're looking for financing and you're looking for customers and you're looking to grow quickly, the European market is just much less appealing in particular than the US. And that's why a lot of the most ambitious European tech founders have made their way to California to make their fortunes. Said, what role has government played in this? Because one of the things has always said when people are trying to criticize Elon Musk is, yeah, but you've got an awful lot of your money out of government contracts. Yeah, well, I think our government needs to do much but I draw up a procurement. The US government has been an amazing procurement partner for American tech companies. But what the UK government is doing well is like the launch of Sovereign AI, which has a couple of weeks goes a half a billion dollar fund to invest in AI companies. It's like a UK Sovereign Wealth fund to put money into AI companies that are being built here. We saw a company this week, raised a one billion dollar round, which is the biggest funding round ever in Europe for a company of this stage. X Deep Mind, an amazing company here, backed in part by the Sovereign AI fund and the British Business Bank, so that it's got public money, so that if the company does succeed and it becomes the first trillion dollar company from Europe, the public succeeds. But the government is also playing a role they're not helping in the sense that even last year they announced the partnership with OpenAI. So we're seeing even greater dependencies on the very new technologies that have been developed. And we have Mistral just across the channel, which is probably in a French company, presumably by the name. Exactly, a French company where we're probably more confident with our allies ship there than we are the US currently. And instead of going to that company, we've chosen to partner with OpenAI. So there's this level of, okay, we are increasing our dependencies on new technology companies that are American. But at the same time, there are great initiatives around backing the next generation of UK tech companies being built here through initiatives like the Sovereign AI fund. So we have a problem, potentially of regulation. There's some argument here about how big a row. that place. We have a problem about capital formation. Can you kind of get big enough, quick enough? And we have a problem of government support and that these things together, Cecilia, have helped to explain why Europe is weak in this sector when it could succeed, where it have been strong. First, I want to take a step back. We are assuming here that what Europe and the UK need are big tech companies of their own. And I would argue against that. I think that even for the US and China, it's very problematic to have companies that are as big as countries as economies. Like what Stan was saying, the UK economy, the UK GDP is around 4.2 trillion. So we're similar to the market capitalization of a company like Nvidia. This is a problem. This means that companies that have never been elected democratically are governing global capitalism, not the Starmer's and the Trump and so on. We may like the more or less, but these people are in principle democratically elected. But what actually happens is that big companies are governing. Having similar companies in Europe will not make the situation any different. The existence of these companies has also generated a lot of inequalities around the world and in particular inside the US and China. And it's not just about inequalities in terms of income, it's also inequalities in terms of knowledge capacities, who produces knowledge and who profits from the knowledge that is produced by the many, who produces data and who profits from that data, who keeps the algorithm secret and then who is using the algorithms in a way that undermines our capacity to think independently. This is not the type of technology that we should be trying to replicate in Europe or the UK, I think. Okay, so this raises a very interesting question, Stan. Which is, as a two-part question read, firstly, is tech sovereignty desirable? Yes, not at any cost. You want to manage your dependencies. There's two ways you can do that, I think. The first is by doing more stuff yourself. The second one is diversifying who you are partnering with. So the UK, as Seb was pointing out, should probably do more with France if it is worried about dependency on the US. We have some interesting partnerships, for example, with Canada on critical minerals within Europe. And the question is, you know, to what extent will we partnering with China? That's one question that a lot of European policymakers are kind of quietly asking if we're worrying about Trump is China a hedge, or are we just creating more problems for ourselves? Or should we be diversifying, Seb is the question which arises from that? I mean, implicit in what you said is, we shouldn't have chosen OpenAI, we should have partnered with Mistral from a strategic point of view. Yes, but I would say ideally, we should be building these technologies ourselves, right? If we live in a world where there are giant technology companies, we should be investing today, so that in 10 years time, the next 100 billion trillion dollar company will be built here in the UK. Then we have this alignment of sovereignty and GDP growth. And that's the ideal situation. We build the best tech companies of the world here. And if we can't, then we should partner with our closest allies. So, Zilia. I would actually ask ourselves, do we want that? Again, I think that it is unfortunately achievable, but the answer is no, we shouldn't want that. Again, let me emphasize the type of technologies that these companies are developing, our technologies use for as automatic weapons, our technologies use for controlling workers inside the workplace, our technologies use also for controlling us in social media. I honestly think that this is not the type of technology that we should be building. So actually, when I talk about digital sovereignty, I don't think that digital sovereignty should be equated with the idea of techno nationalism or a country producing everything in a house which in a global world simply doesn't hold water. Digital sovereignty is about decision-making power. It's about democracy. It's about who decides the type of technology that we can get. But it's also about not being dependent, isn't it? Absolutely. Because if you're dependent on technologies that are black boxes, if you're dependent on technologies that you cannot even audit, of course, you have no decision-making power over them. So it's not about whether everything is public or private. It's not about if things are built in the UK, they will be better, simply because they are built here. It's about how we create public-led institutions that can govern the most important technology of our times. Stanley, listeners to this program as listeners and views of almost every program currently going are really aware that AI is well into its revolutionary phase, but we know we're near the end of it. There is a kind of desire, it seems to me, to get ahead in some way of the developments in this technology. Can UK and Europe do that? So the difficult question that they will have and already you are seeing it in Europe is AI is going to help companies improve their productivity. If you think that that's going to be the case and certainly a lot of companies are investing a lot, do you tell those companies, look, you have to use European models, even if they're not as good as an American model or a Chinese model, but you have to use the European model so that we kind of build the confidence, we build the user base to improve those models, or do you use the off-the-shelf models that already exist from the likes of open AI and deep seek and anthropic? If you're French, you're very tempted to go for that first option, which is let's keep things domestic. If you're the kind of the more Anglo-Saxon, from the more Anglo-Saxon faction, you think, okay, actually, let's just get companies to be more productive, that will generate more investment in AI and hopefully we can get in on the second wave. And if I was the Stanley Pinyal faction, what would I be saying? I think certainly you don't want to hobble your companies. I think AI is going to change companies as much as the internet before in the same way that companies 30 years ago used the internet even though it was largely controlled by the US. I think it would be kind of crazy for European companies to give up the potential productivity gains from AI. So, certainly I'm more in the camp of use it, invest in it, and don't protect local monopolies in AI just because it apparently helps your national sovereignty. So, yeah, I think it depends on the industry. I think we actually, there's a balance between sovereignty and quality. And if using the best model as American, we lose out on sovereignty, sometimes using a local model or like a mistrial, maybe lower the quality, but up the sovereignty, I think that's better for specific industries. In defense, I think we should, we willing to sacrifice quality for sovereignty and maybe the NHS and governments, private companies use whatever model you want, right? Let competition in one world, but we should still focus on creating an environment where we can build the best tech companies. And I think that we can in Europe, you know, this year alone we've seen hundreds of millions go into chip companies to try and rival Nvidia's dominance as here in London. The company I mentioned before, it's just rated billion. Last week we saw another round for $500 million. These are companies that are trying to be open AI, be anthropic, and be the next generation of AI companies. We've got the capital, we've got the talent, there's absolutely no reason why we can't build them here. And that's what we should focus on. Stanley, I want you to imagine something for a moment, you step out of the studio and you just happen to bump into the minister for AI. And you're going down in a lift with him and you've got 30 seconds and he says, what's the one thing that I should do to try and help me out here? I think think of AI today in the same way that we were thinking about the internet 30 years ago. The impact that it's having now is already significant, but the knock on impact that it will have on lots of industries for better and perhaps for worse will be extremely significant. So don't think of AI, just of its impact today, but think of how it's going to upend entire industries in the same way that the internet upended the media industry, the technology industry, the car industry and so on. And that's all we've got time for. My thanks to Stanley Pinio, Cecilia Recap and Seb Johnson. And my conclusion, hold on a second, I'm just going to ask Czech GBT what my conclusion should be. We'll be back at the same time next week. Goodbye. You've been listening to the briefing room with me, David Aronovich, the producers were Ben Carter, Kirstie Knight and Sally Abrahams. The production coordinator was Maria Oggandelli, the sound engineer was James Beard, the editor was Richard Varten. Another addition of this podcast will be along again really soon. Hello, I'm Tyler West and I'm Alfie Watts. And this is the D-Tour, the official companion podcast to race across the world. This is the post-episode checkpoint where you'll hear the latest shout around each episode from us and our race superfan special guests. Plus, I'll be joined each week by a resident travel expert, Alfie. I'll be revealing my optimal way to travel through each leg, including visits to all of those unmissible details along the way. And we'll also have some not seen anywhere else exclusive content at the end of every episode, cannot wait. The D-Tour will land straight after each episode of Race Across the World, you can watch on I-Player or listen on sounds where you'll also find extra bonus content. We'll see you then.