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Works in Progress is an online magazine devoted to new and underrated ideas about economic growth, scientific progress, and technology. Subscribe to listen to the Works in Progress podcast, plus Hard Drugs by Saloni Dattani and Jacob Trefethen.
Sam Bowman: I'm an ultra optimist.
Almost always when people are depressed
about something or think something is
completely doomed, I tend to think they're
underestimating human being's capacity to
self-correct and for things to get better.
But even I, when it comes
to Europe, feel pretty glum.
There is a sort of last chopper out of
Saigon feeling about Europe where all
of the talented people I know who are
Europeans kind of want to get out or are
already leaving, or have already left.
And the people who are left kind of envy
them and wish they could get out as well.
It's easy to understand
why that would be the case.
Europe hasn't really grown
in the last 20 years.
Europe has very high energy prices
now and the continent seems basically
unable to defend itself against
what is actually a much poorer
and much smaller country, Russia.
So I thought I'd talk with Aria and
Peter about the state of Europe,
whether the continent really is doomed.
Why it seems to be in such a bad way
and whether there is any hope, whether
there is any cause for optimism.
Peter, what do you think?
Pieter Garicano: Well as a European
who moved to America a few years ago, I
think it might perhaps be one of these
examples you're referring to, Sam.
I think in general I am perhaps
slightly less, pessimistic in
the story you're describing now.
I think we might discuss this
in our conversation today.
There are some tractable things we
can do, kind of win-wins and there
are models of European countries I
think that are performing very well.
And so I think perhaps when you
learn from each other, there'll be
things we can copy and hopefully,
free lunches at the European level,
the national level, they might fix
these problems we're gonna discuss.
So overall, maybe slightly more
optimistic than you are at the moment.
Sam Bowman: How about you, Aria?
Aria Schrecker: I think I'm 50/50, I think
in the nineties or early two thousands
if you were choosing between living in
Europe and America, I actually think
Europe's got a slam dunk win over America;
almost all of the gap in wealth is about
Europeans working shorter hours, and
then you've got like extra health, extra
longevity, less pollution, less crime.
Basically I think Europe is a better place
to live in the nineties and two thousands.
I think now it's about 50/50.
I think lots of Americans would pay
a significant chunk of their wealth
to have European health outcomes.
But if you just continue looking at
current trends, which I think is a good
way of making predictions, I don't think
I'd wanna stay in Europe in 20 years time.
Sam Bowman: The simple story or
the very compelling story, what's
the thing that the US has that
Europe clearly doesn't have?
And that's a massive technology sector.
this is something you've
written a lot about Peter.
Pieter Garicano: I think oftentimes
the one way of thinking about
this is that people had to compare
corporate performance in the US as
corporate performance in Europe.
And they'll say these things like stock
market returns, compare the German stock
market versus the American stock market.
If you'd invested a hundred bucks 10
years ago the American one would've
returned 400% more in profits.
or things like corporate R&D.
American corporate R&D is twice as high.
If you think about corporate investment
it's roughly also twice as high.
But then what happens is if you remove a
very small share of outlier performers,
we can call superstar companies, just
like the top seven companies in America.
The magnificent seven.
Then a lot of these metrics suddenly
- the gap becomes basically zero, right?
So stock market returns goes from
like a hundred percent to barely 5%.
Aria Schrecker: Is the magnificent
seven all tech companies?
Pieter Garicano: Yes.
Aria Schrecker: Okay.
Pieter Garicano: Right.
And if you compare like corporate
R&D, the gap shrinks about two thirds.
If you compare investment, it
shrinks away two thirds again.
And so the idea is basically that all
these huge, huge, enormous outsize
metrics or gaps in outcomes are driven
by very, very, very few companies.
There's more ways of
thinking about this, right?
So four companies in America; Metamazon,
Google and Microsoft spend twice as much
on R&D every year as the entire public
sector of every European country combined.
And
you can also see this in, I think,
productivity trends where, again, if you
remove software and industry close to
software, the gap in productivity growth
the last 20 years between, the EU and the
US is basically zero with the software
industry and adjacent industries, then
it's like one percentage point per year.
And so one story you could tell what's
happened in Europe is simply that the
gap we've preserved in productivity,
in returns and in investment is just
a function of its software industry.
And if Europe could have
a software industry, then
everything else would be fine.
I think this is sort of the thing that
people often think of as well, right?
It's like why Europe
doesn't have a Google.
And I think people, notwithstanding like
Tesla and Elon Musk's company, compare
the American manufacturing sector to the
European manufacturing sector, it's very
hard to make the case that companies
like Bass F or Siemens or Ferrovial are
any worse than the American counterparts.
In fact, they're pretty much
better than American counterparts.
And so one story you can tell about the
US-Europe gap is just the software story.
Sam Bowman: I'm not entirely convinced by
that, but let's stick with that for now.
So,
the way you framed that, kind of
sounds as if it's like America just
got really lucky in having NVIDIA and
Google and so on, but the companies
that are now in the Magnificent Seven
were not obviously superstar companies
10 years ago, some of them anyway.
Microsoft was, although before five
years earlier, Microsoft didn't
seem like it was necessarily the
gonna be this kind of world beater.
NVIDIA definitely didn't seem like it
was gonna be one of the most, if not the
most valuable companies in the world.
And yet America just repeatedly
has been able to create these
like ultra valuable companies.
And so I wonder if I kind of think that
that argument - and I don't really know
that you actually believe this, but I
think sometimes I've heard that argument
as a kind of excuse for Europe, it's like
"Oh Europe- America just got really lucky.
They ended up with NVIDIA Europe didn't.
So, you know, tough luck." But
really the story there is two things.
One, it's the nature of these
markets is that, I think because
they're IP dominated, a lot of
those companies are platforms.
They tend towards having a couple
of very large, if not one very
large player at any point in time.
I don't think that's because they're
not competitive, by the way, but
I think that's for other reasons.
So one thing is a single company
manages to capture lots of the
value in that given market.
So in GPU Design, for
example, in NVIDIA's case.
And the second is America is really good
repeatedly at creating those companies.
And so if somebody told us that there
will be another magnificent seven, but
it will be seven different companies
in 10 years, you would be very,
very, very well advised to bet that
those companies will all be American.
Maybe some of them will be Chinese,
but like it would be a very good bet
that none of them will be European.
So it might be true that these
seven companies have driven a lot
of this, at least stock market gap.
And I do want to come back to that,
but it doesn't imply that that's
just- it doesn't tell us very much.
It just tells us "Yeah, there
happened to be seven companies that
have created a lot of this value."
Aria Schrecker: Also, if you compare
those companies to the sort of
European equivalents, they start off
by doing very well in one vertical.
So Google starts off with search,
but now Google has so much
more business outside of that.
Same thing's true with Meta,
I mean Facebook originally,
same thing's true with Amazon.
Like who would've thought that bookstore
retail would've ended up being the
biggest like AWS Cloud Compute Services.
Spotify didn't do something like that.
Sam Bowman: Yeah.
Aria Schrecker: DeepMind ended up
like only doing like the AI lab
thing and ended up getting purchased.
Estonia had something like 10 unicorns.
None of them became mega
Multi-Tech companies.
So there's probably something I would
guess related to tax, R&D and maybe
human capital about not expanding
into other verticals as well.
Sam Bowman: Well, as Jack Wiseman,
a friend of the show has argued
to me, in a way these companies
are kind of magic, right?
They're like the machines for
turning capital into returns.
It's not the case usually that you can
just put more and more money into a
company and it'll become more and more
profitable, more and more lucrative.
Something about, maybe not specifically
these companies, but there's something
about the way these companies are run.
That means that it's like you can
get above market returns fairly
repeatedly over a really long period
of time just by putting more and
more capital into these companies.
It might be that they're really well
run, it might be that they have some
kind of- I mean I'm not convinced by
this, but it might be they have some
kind of monopolistic position that
sort of allows 'em to do leveraging.
That's obviously the European story,
which we might come back to in a second.
But it's it's kind of unprecedented
to have companies where you can just
put money in and you would be really
well advised to invest your money in
these companies, even though they're
several trillion dollar companies
now, just more and more money, they're
like utility monsters but for capital.
Pieter Garicano: I think there probably
is a lot of path dependence involved.
It seems, seeing if you were like the
the god king, you probably wouldn't have
all your tech companies in the Bay Area.
The Bay Area seems a pretty
bad place for a lot of reasons.
It's very hard to live there,
the housing's terrible, it's
controlled by interest groups.
I mean, you and I have been
frequently and there's like
clearly lots of quality of life
downsides to being in the Bay Area.
And I think many people perhaps
if we all can agree more on
this, maybe we'd agree to move it
to Texas or Florida or whatever.
Sam Bowman: Although I will
say it's not that bad, right?
Like it's very bad compared
to what it could be, but it's
also got a great climate.
If you like hiking, which Americans do.
All Americans, especially
Californians love hiking.
They get up at 5:00 AM
and they go hiking.
Aria Schrecker: That's because
they're supplied with hiking.
They don't inherently love hiking.
Sam Bowman: No, I think they love hiking.
I think they actually have a genetic
predisposition to liking hiking.
Something to do with-
Aria Schrecker: Surely California is
like one of the most diverse places.
It can't be like-
Sam Bowman: Yeah, yeah, yeah.
Exactly.
California's the most bountiful
place on earth, so it's not that bad.
Well, that's all I'm saying.
Pieter Garicano: Let me phrase
it this way, you as a company.
Even if you could come up with
reasons why you didn't want to be
there, you can't really defect.
Sam Bowman: Yeah.
Pieter Garicano: You can't like say, "No,
no, I'm going to be the company that's
based out of-" Let's say Elon Musk.
Sam Bowman: You can't
escape economic geography.
Pieter Garicano: Exactly.
And so that'd be one story for where
luck would sort of play a role.
The other thing is that if we believe
this kind of 'software outliers' story
is true, then it has like pretty important
implications for which factors which
knobs are going to dial to fix things.
If you think the software superstar
story is true,then the fact that American
public universities on average are better
than European public universities on
average doesn't really matter very much.
Or then,perhaps you might be less, less
concerned about energy inputs because
the retail tariff for electricity
in California is higher than the
tariff for electricity in France.
Right?
So a lot of the stories that, even if you
think the US is very well constructed to
encounter these superstars, I think the
kinds of things that allow it to do it
are not necessarily the kinds of things
that many people commonly think about.
Maybe they can think about
what Europe is doing poorly.
Sam Bowman: Some of the story
you are telling, I think actually
lends itself to quite a robust
defense of the European Commission.
Which, if you're not familiar, you
have the European Union, which is
a kind of the super estate kind of
thing that's sort of layered on top
of France, Germany, stuff like that.
The European Commission is the
executive body, it's like the
cabinet of, the European Union.
And over the last, say 15 years,
but especially over the last 10
years, the European Commission
has really focused on big tech.
it's really focused on regulating
big tech and bringing cases
against American tech companies.
Overwhelmingly, the fines that are
levied are levied against American
tech companies, in terms of the actual
amounts of money that are fined.
I think that's bad, but if you believe
that the problem that Europe has
is that it doesn't have a domestic
tech industry and it doesn't have
specifically a kind of big tech.
It's not just that you want
lots of little startups.
You want like actual big Googles then,
also if you believe, which I do not,
but a lot of people believe that it's
good to protect infant industries.
The most popular view right now in America
is that it's good to have protections
for your domestic infant industries.
You need to give them a fighting chance
against big competitors from overseas.
They usually think of this in terms of
manufacturing with respect to China.
But I think the exact logic- if
you believe that, you should apply
that logic to other areas as well.
So,isn't there a defense of what the
European Commission has done in that A)
they want to and probably should want
to have a domestic big tech industry.
And B) there is a really big, big
tech industry from the United States
that is stopping that from emerging.
So I don't really believe that,
but the measures that the European
Union has brought in, at least
some of them are straightforwardly
just regulating big tech companies.
So like the Digital Markets
Act, which is the kind of big
blockbuster tech regulation that,
was introduced a couple of years ago,
essentially, specifically targets
the five biggest US tech platforms.
So it uses, the size of the company
and it uses the amount of turnover
that the company has, and only five
companies are affected by that.
And those are off the top
of my head, Google, Amazon,
Microsoft, Meta and, Apple.
And if you think that the problem
is that they haven't got a domestic
industry, then maybe that makes sense.
Like maybe you do want to curb
Google's ability to put Google
Maps results on Google search pages,
which is one of the things that's
happened from the Digital Markets Act.
You know, this idea that self
preferencing is a really great evil.
Isn't that a fair position?
Isn't what they're doing completely
in line with the general belief
that is like widely held now that
protecting infant industries from
foreign competitors is a good idea?
Pieter Garicano: So I think you're
basically right that the intent is from
our perspective notwithstanding - if
you buy the infant industry story, their
intent is the right one and the focus,
and they use political capital basically
single-mindedly to - suddenly the first
one they commission, single-minded
lead to focus on the software
industry is like really impressive.
I think one story you can tell
here specifically is that the
weird way the sausage gets made in
Brussels has led the outputs to
be much worse than you'd expect.
Because what happens , is
that the EU makes- it can do
regulations which are basically
laws, and they can do directives.
Directives are legally binding orders
from the commission, past the commission
the council, and then the parliament,
which order the member states to create
rules to enforce what the directive says.
And all the big things you
describe are directives.
And so if you read things like the
AI Act, the opening preamble of the
AI Act says the AI Act exists to have
a more predictable, more harmonized,
more efficient regulatory system.
So the whole Point AI Act, it's like
a bit like what we're discussing with
preemption now in the US is that we want
to have basically extremely, consistent
and level playing field across all of
Europe to allow like companies to face a
much, much larger market straight away.
The problem is that because of directives,
the actual enforcement, of a given
law is left to the member state and
the member states ordered to create
its own regulatory bodies to do so.
So for example, in the case of the
AI Act, every single member state
is ordered to have a notifying
authority and an enforcement authority.
Let's say each member state's ordered
to create additional, the actual
enforcement of the act is left to who can
check your hire to be the AI regulator.
These guys, these different
regulators, they talk to each
other, but they're not necessarily
forced to agree with each other.
So you can have cases where,
the Irish,the same story is
true by the GPR for DMA, DSA.
And so you have cases where the Irish
regulations happened with GDPR,the
Irish Data Protection Authority
said to Meta, this is excellent.
You can do X or Y. And then the
Austrian and German data protection
authorities disagreed and then
fine Meta billions of euros.
And so, this is a case where the law,
even if you agree with the intent of
the law, the way it's currently being
executed, which is through directives,
makes it so that you're going to
always get an extremely high friction
and fragmented regulatory system.
They currently have, I think the count
is between these four laws, they've
created 270 different tech regulators.
Sam Bowman: Hmm.
Pieter Garicano: And that of
course has really distortionary
effects as well for what kind of
basically very large fixed cost.
And so if you're a large company, if
you're a Google or a Meta, you have a
thousand guys in your Brussels compliance
office and they're really good at this.
But if you're a smaller company,
then you actually really struggle
with figuring out what the 270
different bodies want you to do.
Aria Schrecker: My prediction here
is also that while there are several
people who are thinking like the way
Sam has been thinking about we need
to create this infant industry, or we
need to, we need to create like a mega-
Pieter Garicano: The way
Sam is pretending to think.
Aria Schrecker: Is pretending to think.
Sam Bowman: I'm going to
give a counterargument to
my argument in a second-
Aria Schrecker: Yeah!
But I suspect loads and loads of those
people, if you read the journalism about
big tech, if you talk to Europeans and
British people who are involved in this
regulation, they don't think that at all.
They actually do think there's a problem
with the size of these companies and
a lot of these policies you would
expect to hit any European company
that was on the brink of becoming
one of these big 10 companies, right?
Like you would expect it to dry
up venture capital investment.
You would expect it most of these
companies to say, "Oh, the domestic
regulator is not very good. Let me go
and run away to the US to build this."
Pieter Garicano: Very, very briefly.
Before you say your counter
argument to yourself,I'm not
entirely sure I agree because.
Aria Schrecker: You know
more Europeans than I do.
Pieter Garicano: No, I just think
Germans love that Volkswagen is big
and if up to them Volks can be way
bigger and the French are so chuffed
that Airbus is now like the largest
aircraft manufacturer in the world.
I don't think it's an aversion
to big companies per se.
Aria Schrecker: Maybe Brits are
the only self-effacing people who
throttle their own biggest companies.
Pieter Garicano: Maybe self-effacing guys.
But I actually think that if Google
was like called Schmoogle and it came
from like Bavaria, then we would
have like pro Schmoogle subsidies.
Sam Bowman: There is definitely a
strand of thought influenced by the
Neo-Brandeisian, the kind of Lina
Khan, Tim Wu type people in Brussels at
least that does think that big is bad.
And yes, the German public would
love to have, you know, Degoogle,
and a trillion Euro search company
would be great if it was based
in, Berlin or something like that.
But, you know, Margaret Vestager or
other people like that who are more
influenced I think by slightly more
sophisticated, although I think wrong,
theories of competition and antitrust, do
have a sense that it's bad to have big
companies and a really well-functioning
market is where you have lots of little
companies and you have lots of entry and
that's how you get the kind of churn that
you want from competition's like that.
An example being the European
Commission blocking the merger of
Siemens and Alstom, which make trains.
And the justification for that merger
was that there are gigantic, Chinese
companies that have like scale that these
two companies cannot have by themselves.
And if they can merge, they'll get
massive economies of scale and so on.
This is called a national champion
theory of like why you would want to
allow this, and she opposed it on I
think like pretty standard 'It's bad
to have a giant single company making
all the trains in Europe.' I actually
think she's probably right on that one.
Can I make an argument against myself?
So I think in fact, the infant
industry's argument is wrong and,
basically not a very good argument.
I'm not convinced it's true in
manufacturing, and I'm definitely
not convinced it's true in tech.
And I think the timeline in recent
history around technology makes this
point, I think really, really well,
which is; it was a few weeks after
the Digital Markets Act came into
force that ChatGPT launched right?
By a company that didn't have any prior
OpenAI, didn't have any prior services.
It didn't have any existing user base.
It wasn't connected to one
of the big tech companies.
It had some investments from them,
but it wasn't like part of Amazon
or Google or something like that.
And yet it was able to become the fastest
growing consumer tech product ever.
Anthropic another example of now an
extremely successful company that came
after ChatGPT had reached significant
scale, Claude took quite a while
to become as mature as ChatGPT was.
And obviously Anthropic was a much
smaller company having been founded
by people who left at OpenAI.
Both of them are now really,
really, really important players.
And again, both of them are American.
You know,I think that that to me is a
really strong argument that the kind of
diagnosis that the European Commission
and the European Union made of how the
tech sector works was really, really
broken because they assumed that you
would only get kind of incremental change
and it would come from the incumbents.
And by far the most important
technological change of the
decade came from two new entrants
that had no prior user base.
That to me, really upends the kind of
infant industry's argument, at least as
it works with tech, because it suggests
that you don't need to have a domestic,
you don't need to have like protection,
you don't need to have a certain amount
of scale, if you have a good product.
And it also implies that it's
not actually incremental.
You know, that the main competitor
for Google search is not DuckDuckGo
or another search engine.
It's ChatGPT, obviously,and
that's important.
It's also, and again kind of cutting
against the narrative I gave earlier.
I think important to note that the
GDPR, I don't think there is a plausible
argument that the GDPR was done in
order to protect European tech companies,
the actual effect of the GDPR has been
in the same way as the point you were
making about the AI Act has been to
raise fixed costs massively, right?
To make it really difficult for small, new
entrant companies to do things with data.
Incidentally, it makes it really
hard to use data for training
of AI, so they've kind of hurt
themselves there as well by accident.
But the GDPR, which,most people
probably associate with cookies,
banners, which actually predate the
GDPR but are now part of the GDPR.
Like the really important part of the
GDPR is to say you may not use data
that you've acquired via, or like for
the purpose of A, for purpose B. Yes.
So you can't cross pollinate using
data that you've acquired,which is
totally unheard of really in America.
You know, that there's some state
level regulation in California
that somewhat approximates it,
but by no means as strongly.
And that really, really holds back
scale because it stops any company
that has success in area A cannot
use that to build up products in area
B, and I think that's been a massive,
massive, inhibition to the development
of companies that do the sorts of
things that Big Tech does in Europe.
Pieter Garicano: So, Sam, I think you've,
you've convinced me, that both antitrust
and GDPR are like problems and the
things worth fixing and they, it seems.
You can reason through the kind of micro,
the price reasons why it would have a
bad effect on, investment in tech and
why it would tell people from entering
and from trying to build big companies.
I think if we're trying to explain the
lack of superstars in Europe, it kind of
presents with a bit of a timing issue.
And the timing issue is because
Vestager and the the antitrust
school kinda, she enters in 2014
with the second younger commission.
And, in the case of GDPR,
that is passed I think in 2018.
Aria Schrecker: About then.
Pieter Garicano: And so the
point is that at this point,if
you look at 2014, take that as a cutoff,
at that point Europe is very far behind.
There are no competitors
in Europe to google.
Aria Schrecker: It happens in
response to America already
having these like superstars.
Pieter Garicano: That's exactly right.
That's exactly right.
It's a response to
America's having superstars.
And in fact, if you look at when should
we actually, look at the divergence?
it's like in the nineties.
It's like 1995 roughly.
It's basically the moment you see
software emerge in industry, that's
when Europe starts falling behind.
And between like 1995 and 2005, there's
three times more capital investment
in software in, the US than Europe.
Well, it's in ICTI which is software
because also hardware counts as well here.
And so if we want to have a first order
explanation, we should try to think of
something that was already a divergence
in policies back in the nineties.
And I don't think antitrust or excess
EU tech regulation applies there.
I don't know if one thing we get into here
is culture, which I think people point to.
I don't have very strong views
on whether culture matters.
Maybe Aria you do?
Aria Schrecker: Well, I was gonna
throw out two other guesses.
I suspect, tax rates and the amount that
the single market is integrated versus
the US market being integrated, I think
the kind of investments that create
that kind of tech, you basically expect
to spend a while doing R&D or at least
you expect to be the kind of investor
who bets on lots of little things.
So you've gotta have a lot
of capital available and for
that hit to go really big.
I think this is a big part of the reason
potentially why Estonian companies
have all basically left Estonia, and
they've gone to either Britain or other
parts of Europe with slightly bigger
markets or they've gone to the US.
Which is that you've built something,
you've got your market and if the
regulation is slightly different
from place to place, you've
actually gotta have a new team,
and scaling is much more expensive.
Whereas if you create like a software
company in the US, I think you can
basically expect to be able to sell
your services in every US state.
So the returns of something that's IP
heavy are probably much greater in the US.
And then with simple things like
capital gains tax being slightly
lower, you would expect the value of
investments to be much higher as well.
So I think that could probably
explain almost all of that difference.
Pieter Garicano: I think the single
market explanation- I'm I think
personally somewhat skeptical that it
matters as much as people point to it.
There's I think two different
ways we're thinking about this.
If we think of the best performing
countries globally at R&D or cutting
edge tech, they don't often have a
very large domestic market, right?
Countries like Israel, countries
like Singapore, even if you
think of very advanced economies
in East Asia countries like-
Aria Schrecker: South Korea, highest
number of patents in the world.
Pieter Garicano: South Korea, Taiwan.
these are like not very large markets.
These are Netherlands sized
markets or Sweden sized markets.
They don't necessarily need a very large
domestic market to be able to have a very
successful export oriented, tech industry.
And so if I were representing the view
of the Dutch or Swede or Danish kind of
tech policy maker, what they tend to tell
you is that they don't really need a very
large internal market to sell goods into.
Because they think it's
basically if you're a Swedish or
Dutch - think of Sweden right?
So they have Spotify,
Spotify sells globally.
Spotify doesn't really live
or die at whether like they're
selling very much in the Balkans.
Their position basically is that they
want to have a single market for
capital, a capital markets union.
This is something they think is lacking.
So they wouldn't be able to raise
money from all of Europe, but they
actually don't really care about
selling that much into Europe.
Now the second thing I'll say about
the single market is that you often see
tossed around, nowadays these statistics
about how much of an internal tariff
the friction single market represent.
The common stat you see is 44%
tariff equivalent for goods
and 110% tariff for services.
But if you actually look slightly
under the hood, that specific
estimate is sort of dodgy.
Sam Bowman: It's very dodgy.
Actually, having cited
it myself in the past.
Pieter Garicano: I have
cited myself as well.
It's extremely dodgy.
Basically, they use a gravity model.
So a gravity model, the way they
calculate it is they try, basically
they predict how much trade has
been between you and a neighbor.
If the only friction was distance,
and then they calculate how large
of a tariff you should have to
achieve that, to actually explain
the level of trade you have.
Sam Bowman: But it doesn't
factor in differences in language
preferences, differences in tastes.
Exactly.
It's all it's doing really is
inferring how big the gap in trade is.
It's not actually saying that there
is a tariff; the total barriers
between, or a total gap between like
perfect trade, perfectly frictionless
trade and reality is this much.
I think it's a total misnomer
to describe that as a tariff.
And I, and I'm embarrassed because I have
actually cited that myself in the past.
because it comes from the IMF.
Pieter Garicano: And if you actually
look at like other estimates.
More rigorous done like-
Aria Schrecker: I guess you can do
things that control for how willing
people are to move across that barrier
as like an explanation of like cultural-
Pieter Garicano: Yes, exactly.
And so if you actually look at the
gap in like the cost of goods and
the core - other thing by the way is
the IMF stat is like they basically
treat all of the EU as one block
despite like countries like Croatia,
Poland having joined very, very late.
But if you actually look at the core
EU countries, the ones which were
there and like the very start with the
coal steel community, the differences
in price of goods in any case is like
no greater than the difference in
prices of goods between US states.
And in fact the traditional example
of like where like you had big single
mark fixtures was cars because very
strong national car preferences,the
French drive renaults and peugeots
and the Italians are fiats.
Even there now, the price across
borders basically the gap is zero.
There are some areas in services
where there are frictions,
particularly in like old school
occupations where you have licenses.
20% of Europeans work in industries
where you have an occupational
license that is like national.
Aria Schrecker: Yeah.
Pieter Garicano: Hairdressers,
gymnasts and that kind of stuff.
Aria Schrecker: Doctors.
Pieter Garicano: Doctors,
that kind of thing.
Yeah.
but it's very case by case.
And software incidentally is
not one of those licensed areas.
Right?
Basically the licensed areas are
usually ones with like very strong
traditional like labor interest groups.
And so for example, if you're doing
consulting or high-end service
consultancy, it's an EU wide market.
Aria Schrecker: Banking as well.
Right?
People have like a strong
national preference for banks.
Pieter Garicano: That's
a capital markets union.
That's the separate thing.
Aria Schrecker: Yeah.
Sam Bowman: Even on let's say the
border between Austria and Germany
where they speak the same language, in
theory like a single market should mean
that it's just as easy to do business.
If you're a German company in Austrias
in Germany, even like really basic things
like tax reporting and stuff like that
where you have to report your income to a
different authority will just inevitably
create frictions that don't exist.
Or maybe they do actually
exist to some extent in the US
but maybe to a lesser extent.
Can we get onto, so Peter, you're building
up to your grand theory - and I like your
grand theory, so I want you to lay out,
okay, so what is in your opinion, if the
pointed divergence is in the nineties?
And this very much undercuts the things
that I want talk about around energy
and around, financial regulation.
So you're really pulling the wool out,
the rug out from under me, which is good.
What is the proximate cause do you think?
Pieter Garicano: After it's like
slashing and burning the other bogies.
Sam Bowman: Yeah.
Yeah, because you have a, you have
an article in the next works in
progress setting out this theory.
So this is a good time
to set out your store.
Pieter Garicano: Basically.
It's mostly a labor market story.
Let's frame it through the timing,
which is what happens in the nineties
and what characterizes software and
what makes it different compared
to all the other areas where tech
innovations happened previously,
manufacturing, car making, combustion
engines, even something airliners.
The kind of innovation was taking
place up until the nineties was like
very incremental and because it's very
incremental, it's relatively low risk.
And so what kind of companies is
reward rewards companies that like are
established, that are incumbents, that
have workers, tons of human capital.
And it basically doesn't have
a very high risk of failure.
Software has extremely high turnover.
We see - even if you think of the
biggest and most successful companies,
they've gotten egg on their faces
so many times where you can think of
Meta and the Metaverse or like Google
with Google Hangouts and Google Duo
-
Sam Bowman: Microsoft Windows Phone.
Pieter Garicano: The problem in Europe
is that very tight employment protection
and employment protection is basically
what governs whether you can, whether you
can fire someone, let someone go means
that risk taking is extremely costly
because every time you could basically,
every time you spin up a new division,
you make a new investment and it fails?
You have to presumably either let the
people go or redeploy them internally.
And those steps in Europe are
overwhelmingly with a few exceptions
to talk about in a second, or
we can talk about in a second,
is much, much, much more costy.
To give you a sense roughly of of how
this works - and the US almost without
exception, you can fire someone at will.
You decide one day this person's
no longer employed with us.
There's three big exceptions, but like
the fact that you can do this everywhere.
In Europe it's almost never the case.
There's a few, basically the Germanic
countries have exceptions to this.
Scandinavian countries - overwhelmingly
there are like extremely specific
circumstances we can fire someone.
You offer to show like a
business need to do so.
You have to be able to prove to the
judge, say in France, or in Germany
that in fact there was some reason
why your company had to let someone go.
So that's a cost.
And then once you can let them go,
you have to pay them much more money.
You have to pay them money in terms of
severance fees, you have to pay them
money oftentimes, perhaps to avoid
a lawsuit, basically pay them off.
You have to pay obviously
your own lawyer's fees.
There's often a waiting and negotiation
period and all this, these various
expenses add up to roughly forming
a five to seven times increase in
the cost of letting a given worker go
in, let's say Germany versus, the US.
So to give you an estimate from
two gentlemen, two Frenchmen who've
worked in this very much and are
pushing this issue in Brussels,
[NAMES?] they basically, look at
big tech restructurings or big
company restructurings in Europe
and US the last five years.
And they say in the US on average,
it costs you roughly if you're a big,
big company, seven months, of employee
compensation, permanently let go.
So you say the average seven months
of average wage per person let go.
In Germany costs you 39 months.
Sam Bowman: 39 months?
Pieter Garicano: Okay.
And in France costs you 41 months.
This crucially applies only to big
companies I think, policy makers are
aware of the problems this causes.
And so they've been very nice about
carving out, if you're a smaller
company, if you have say below 50
employees, you have to have like
no restructuring obligations.
If you're below 250, you might not
need to do like a works council,
which is a special employee board.
Above that, you do have to do that.
But from our story, which is like success
is driven by these big, big superstars
doing things and growing the fact that you
exempt small companies doesn't help you.
In fact, the only thing it
does is basically puts a
huge implicit tax on growing.
Sam Bowman: The other point which you're
alluding to is that when you start
a tech type startup, when you like
most startups that are kinda venture
capital funded, your goal is to be big.
Like you're not trying to
make a company of 200 people.
You're trying to make a company
that is worth billions of
dollars or billions of euros.
And you look at what it's like to run
a company worth billions of euros in
Europe or wherever you are or in the
United States, and if the environment
is significantly more or less favorable
in one place or another, you look at
that and you say I don't want to do
this if there are other reasons to
be in other jurisdictions, but the
fact that a company will be heavily
regulated or will be miserable to run
in one jurisdiction if you actually
succeed at what you're trying to do,
must be a deterrent or must be a nudge.
One of the facts I think is very,
very important when people talk about
kind of culture being the reason that
you don't get much entrepreneurialism
in Europe is that you do get
loads of entrepreneurialism from
Europeans they just do it in the US.
Like one in 10 startups in the
US has a European co-founder.
And That's been growing
over the last decade.
I think this is also true and
I'm not gonna beat the antitrust
horse too much, even though it's
like one of my favorite horses.
But Europe has always had a concept
called abuse of dominance that does
not exist in US law, which says there
are obligations on you, if you are
a large, dominant company, there are
obligations on you as to how you treat
your suppliers how high your prices are.
Really quite exacting and demanding
rules that just do not exist in the US.
In the US antitrust law is about
the process of competition.
And as long as you're not frustrating
the process of competition,
you can do whatever you want.
As a big company, you can charge
as high prices as you like.
You can be nasty to your
suppliers and so on.
Europe does not have that, Europe
does not have that attitude.
European law has the attitude
that big companies have social
and economic obligations.
And I think that must be a
thing that people look at.
I don't know how strong a factor that is.
And the counter argument is
like nobody thinks like that.
People, when they're setting up
companies just try to think about
the next five years, and they're not
thinking about what if my company
is a trillion dollar company or not?
I'm not convinced by that, but-
Pieter Garicano: Two data points, right?
One is that, I know of a big
Dutch startup called Bird.
It's a messaging company.
It's like Slack, basically.
It's worth like billions of euros.
It was like one of the
biggest Dutch startups.
They, in the Netherlands', a law which
is if you have more than I think it's,
350 employees, you're obliged to have
a works council, which is like your
employees get together and they have
the right to decide certain things
and basically inform decisions.
And you have to negotiate
them with the restructurings.
And many Dutch startups don't have
them, they just ignore the law, and the
government doesn't really enforce it.
But if you as an employee start suing,
then of course they have to do it.
And so last year an employee
was 'We have like 800 employees.
Why don't we have a works council?'
And then like within two months, the
founder closed the Amsterdam office and
moved everyone to Dubai and Bangkok.
And that's a small data point,
but I think a telling one.
Sam Bowman: Could you just explain
exactly what a works cancel is, because
this is not really a concept that is
well known, I think outside of Europe.
We don't have them in the UK and I'm
certain they don't exist in the US.
So what's the difference between a works
council and a trade union, for example?
Pieter Garicano: So a works council,
and a trade union can coexist.
Most companies have both.
Sam Bowman: Mm-hmm.
Pieter Garicano: The difference is
that a works council, has the legal
right to either be informed of certain
decisions or has the right to veto
certain decisions and these often
are decisions around around employee
compensation and restructuring.
Now it varies very much by country
and the country's most famous for
it's works councils is Germany.
And this example, I'll give - the
works council thing only matters,
really, really matters in Germany
much more so than elsewhere.
because they have something called
co-determination, where not just the
works council have to be informed that
you're gonna do things with notice
periods and heads ups and the like.
But they also have to
have the right to agree.
Basically it's for the company to
do certain things like a change
to pay scales or down factory
restructure or to shut down a factory.
The works council has to agree and if
they don't agree, then you get a kinda
a recreation process where you appointed
an independent arbiter and it goes
through the whole like legal system.
But importantly, the works council
also gets a voice from the board.
In the case of Volkswagen, for example,
half the seats on the board are actually
works council seats, which means-
Sam Bowman: Volkswagen is the largest
company in Germany by revenue.
Right.
So it's a very important example.
Pieter Garicano: It's also the
largest employer in Europe.
And that, of course distorts your
incentives in a very important way
because primarily you're running the
company to some degree, for the benefit
of the people who currently work there.
And so you saw, for example, Volkswagen,
has had a jobs guarantee since 1994.
If you, were hired in a German factory
or if you're a German employee of
Volkswagen, you basically could never
be let go for economic - you could only
let me go if you like personally did
something in violation of the rules.
They guarantee to you there's
never going to be a reason
why you'll be made redundant.
Aria Schrecker: Mm-hmm.
Pieter Garicano: And so, last year
Volkswagen wanted to close four
factories because they're facing
very strong competition from China.
And the works council just refused.
The trade union in coordination
with works council, threatened to do
strikes, and de facto, they extended
the jobs guarantee, for another, I
think five or six years until 2030.
Aria Schrecker: Yeah, so I guess it
basically means a serious proportion of,
I guess most European, big companies,
their decision making is done by
people who don't own shares, right?
So they're not really
profit motivated at all.
They want the company
to continue existing.
Pieter Garicano: No, that
is, they're salary motivated.
Aria Schrecker: They're salary motivated,
which obviously massively changes
the incentives of how businesses run.
Sam Bowman: And also the
workforce as a they have duties
to their specific workforce.
So even if you did a restructuring and
you, the remaining workers were better off
because the company was more successful-
Aria Schrecker: -or even the extra
workers that they hired were better off.
Sam Bowman: Right.
Aria Schrecker: Yeah.
That wouldn't matter as much.
Sam Bowman: The duty is to the specific
workers who are there right now, which
is very much not aligned necessarily
with the kind of long-term success of
the company or even, future workers.
Aria Schrecker: I'm not endorsing the
East Asian model here, but it sounds a
little bit like Europe is trying to do
the sort of South Korean or Japanese
like tribal kind of thing, where you
have these large companies that are
like kind of in bed with the government.
I think the government in those
countries, like in Singapore as well,
they massively preference those companies,
but because they're so productive,
because their workers are so good,
because they export loads of stuff to
the world, everyone kind of accepts that
as being part of their economic system.
Sounds like in Europe we want those
companies to have those pro-social
duties, but without the kind of government
kickback element where they're massively
supported by the state as well.
Pieter Garicano: I'd say in their defense,
this system, I mean the people who came
up with this probably was (unsure).
But there are strong reasons why you
might want to do this, which are that
the theory behind like having the
workers councils and having the duties
towards your employees is that basically
allows you to do way more human capital
investment because you know that someone
is almost certainly not to go be poached.
Aria Schrecker: Yeah.
If you train someone up for five years-
Pieter Garicano: Exactly.
Aria Schrecker: You get them
for the rest of their careers.
Pieter Garicano: Career.
Exactly.
Exactly.
And so the theory for a very long time,
and of course it's like this was the
explanation for why for a long time,
and it's even now, many European in
companies that are incremental innovation
industries like car making are just
much better than American counterparts.
It's the European like
combustion engine is like a, 20th
century, 21st century miracle.
In fact, every single year, without
fail, the Volkswagen guys would come
on a press conference and say we've
squeezed out like extra kilometers
proficiency outta this thing.
And it's like tiny.
And so the idea was that as long
as the patient's incremental,
this system is supposed to work.
And it kind of did work.
The problem is taking big risks.
Aria Schrecker: This strikes me as
the explore, exploit, trade off,
basically like with current technology,
if you knew that we were never going
to invent anything else ever again.
And actually this is like
a very reasonable system.
You just want like the best human capital.
You want people to have very stable lives.
But, I think you could have predicted
quite easily that we were going to
keep inventing things and having a
very stuck economy, was a problem.
Like I remember having this argument like
10 years ago, I think before, before it
was quite clear this was a crisis that you
could predict this was gonna be a problem.
Sam Bowman: Yeah, and people have been
highlighting the problems with European
labor market laws for a very long time.
It's, it is not an original thing
to say that these are a problem.
What is original or what has changed
is that certainly when I was first
getting into the game, the big problem
was unemployment rates in France and
Germany, especially in the two thousands.
The big story was France and Germany
have persistently high unemployment
rates, especially among young people.
And this is because it's difficult to hire
people, it's difficult to fire people,
which makes it difficult to hire people.
Right.
then you kind of also think, okay,
maybe this functions as a bit of a tax
where, in exchange for safer protection,
things like that, you get paid less.
All of those things equilibrate in a
way that's sort of maybe not perfect
for the worker, but shouldn't have
like really massive long-term effects.
What I think is interesting about
what you are saying and what I
find very compelling about what
you're saying is it's actually much
less of a kind of static issue and
it's much more of a problem in this
dynamic way because It's actually
stopping the companies from changing.
And like that, that fits very
nicely as you are arguing with the
idea that there was actually a long
period where innovation was not
the hallmark of the global economy.
In the post-war era, being able to
build really great cars was like not
particularly driven by massive amounts of
R&D or massive amounts of experimentation.
It was driven by like really incremental,
just like engineering, human capital
accumulation, things like that.
And then your point is something
actually fundamentally really changed.
We moved from the kind of tangible
economy where human capital
maybe was like the tale of human
capital manage that mattered a lot.
And just like having good people
in your company was really valuable
to a much, much, much more outlier
dominated model where like a couple
of companies doing really well and
having the best people working for
them could just explode and become
what are now trillion dollar companies?
Pieter Garicano: And perhaps
the best argument in favor
of this explanation is that.
there is huge amounts of variation in
Europe in terms of labor market policy.
I mean this is an area
we're talking about.
Europe is almost misleading because
it's not a EU competence at all.
The labor market policy in Sweden
and Spain couldn't be more different.
And what you see is the countries
that have much more flexible systems.
Have much motivation, right?
So if you were to name to me what you
think the most like innovative countries
in Europe, every single one of those
would be have a very flexible system.
Countries like Switzerland,
countries like Denmark.
Aria Schrecker: This was what I
was gonna throw in where, so like
we've said, we talked about the tech
story and that that actually doesn't
explain like some of the difference.
And now, this story I think
explains some of the difference.
But as far as I can tell, and like
only in the past few years has the
UK started to develop this kind of
like European style labor market.
But, still not completely, but we're
starting to see the first signs of it.
Sam Bowman: So I'm obviously
talking my book here, but I don't
think labor market laws so far
matter that much to the UK story.
I think it's much, much, much more of
the kind of standard line that I always
give about not building enough houses,
not building enough, infrastructure.
Energy supply, stuff like that, which
I do actually think coincides pretty
neatly with the rise of software and
with the fact that we do have some
really high productivity places.
They just haven't been allowed to grow.
But we talked almost exclusively
about technology for good reasons.
You set out the reasons, Peter, but it's
also the case that, the Buc-ee's, the
convenience store kind of gas station
pays managers like $150,000 a year.
Now I'm told by the way, that
being a Buc-ee's, manager is a
horrible job, it's really hard.
They stretch people to their absolute
limits and the turnover is massive.
So It's not actually
necessarily indicative.
And like gas station managers and other
companies get paid a lot less, but
probably have like less demanding jobs.
So Buc-ee's, has a very
particular business model.
Pieter Garicano: I don't know
if you've seen a Buc-ee's,
but these things are enormous.
They might have 200
employees working for you.
Like you're a pretty big boss.
Sam Bowman: Yeah.
Aria Schrecker: I have another example
that I recently saw, which is Taylor
Swift's dancers get paid 150,000 a year.
And that's like normal
for dancers in the US.
Pieter Garicano: It's a lot or little.
Aria Schrecker: I think
that's a big salary.
Pieter Garicano: Taylor Swift's dancer.
I mean-
Aria Schrecker: You're
at the top of your game.
Pieter Garicano: Talk
about a superstar returns.
Sam Bowman: I don't think
comparable West End performers
get paid, anything like that.
Aria Schrecker: I was going to
say, I have a friend who's on the
West End, she gets paid like 40K..
Sam Bowman: But the point is that
even if we take out the technology
sector, doctors are much more-
Basically every major city has much
higher wages than London does, for
example, or Paris does, or Berlin does.
Any comparable part of the US does
significantly better than a comparable
part of Europe or Western Europe.
Let's exclude the Eastern
block for obvious reasons.
Like even if we're comparing, I
don't know, there are probably
pockets of the US like the Rust Belt
and so on where that isn't true.
But kind of generally speaking, almost
anywhere you go, people are better off
than their counterparts in Western Europe.
And that can't possibly be
explained by, Technology.
I think you'd have to tell an incredibly
strong story about diffusion of technology
which I just don't think actually
matches with the reality of what
these places are for that to matter.
So why is it that, let's say South
Carolina, why is it that like people
who live in Charleston, South Carolina
are significantly richer than people
who live in Brittany in France, or
people who live in, Tuscany in Italy?
That is not explainable by the rise of
the software industry, I don't think.
Two examples that occur to me are, and
these do, I think pretty well coincide
with the divergence, not since the
1990s, but since mid two thousands
are energy and financial regulation.
So.
In the early two thousands, electricity
prices for business users, industrial
users were roughly the same.
In Germany, the us, France, Spain,
Britain, they're basically the same
in in the US and Western Europe.
Italy is a weird outlier.
Italy's had like really high electricity
prices for a really long time.
But the other countries-
Pieter Garicano: Do you know why it is?
Sam Bowman: No, no.
In the two thousands,
a few things happened.
The price of gas and oil rose
significantly around the Iraq war.
The US has quite significant
domestic reserves of those things.
Europe has not tried to exploit
whatever domestic reserves it has.
It may have domestic reserves of gas via
shale, but it just hasn't exploited them.
So the price of gas rose significantly,
which basically I think co coincided
with, energy prices rising in Europe.
But that can't be that big a part
of the story because the price
of gas in nominal terms, so not
even inflation adjusted terms was
lower in 2015 than it was in 2005.
So over that 10 year period, the price
of gas was falling while electricity
prices were rising in Europe.
And roughly flat in the US, it
was slightly rising, but basically
just in line with inflation.
Aria Schrecker: How much does that
vary between European countries?
Because my guess is Britain doesn't
exploit its natural gas and also makes
a bunch of policy choices to not
import very much, but the story is
that Germany was importing loads and
loads of natural gas until Ukraine.
Sam Bowman: Yeah, so Europe
does actually have basically
a single market in gas.
Pipelines exist between Britain
and Norway and Britain and France.
I think, there, there, there
is essentially a single price
for natural gas in Europe.
Electricity obviously is not just
determined by the price of gas, it's
the price of gas is a component of the
price of electricity, but, It's less
for a third of the overall price.
So one, so one part of the story
that is important and I think is
really, I'm not trying to downplay,
is that the price of gas rose quite
significantly in the two thousands.
However, as it was essentially
flat or even falling electricity
prices kept rising and rising.
And when we talk about, and this is
one of my big complaints with the
Draghi report, which we haven't really
mentioned, but if we - most I think
most Europeans having this conversation
would start with the Draghi report and
sort of, okay, well Mario Draghi's made
all these interesting observations.
There is some really
interesting data in that.
But actually I think it's a
pretty incomplete report.
And one of the things I think is
really incomplete is the stuff that
it has on energy because it takes
the kind of important moment of
divergence as being the Ukraine war
where Russian gas supplies dried up.
We all know that electricity prices
and gas prices spiked massively.
we all know that they rose
gigantically at that period-
Aria Schrecker: Four times or something.
Sam Bowman: Yeah.
And I mean, anybody who lives in Europe
will have personally felt that in a way
that is actually pretty unusual except
for, petrol prices to actually feel like
macro effects in your electricity bill.
So my view and my kind of somewhat,
I guess, controversial claim is that
it was Europe's taking climate change
much more seriously than the rest
of the world, and building that into
policy much more responsibly, you
might say, than the rest of the world.
That has been one of the big drivers
of the rise in energy prices.
So, something like 80 gigawatts worth of
coal production plans have been shut down.
There's been a huge shift away from coal
towards, mostly towards, wind and solar,
but obviously to some extent towards gas.
Because you need gas.
If you're building wind and solar.
Now that might be a good thing to do.
Coal is, coal is awful.
Very, very few people want coal.
Even if you were a climate
change like skeptic.
Aria Schrecker: You don't want the
little particulates in the air.
Speaker: Yes.
Coal is terrible for
Sam Bowman: people's health.
It's dirty.
It's unpleasant.
but it is cheap.
Right?
And one of the, and one of the effects of
moving away from coal, to wind and solar
and gas has, I think, been a very, very
high increase in, electricity prices.
Related to that is the
emissions trading scheme.
So Europe is basically the
only jurisdiction that like
actually prices carbon.
And China has a carbon price, but it's mu,
it's a fraction of what it is in Europe.
It's like a fifth of the
level that it is in Europe.
Obviously the US doesn't have a national
carbon price, but it does have kinda state
level attempts at doing carbon pricing.
Europe also has net zero laws.
Every European country has a, Europe
has a net zero law, which requires that
everything that the government does be
in line and like be part of a long,
of an overall strategy to get to net
zero, emissions reductions by 2050.
And I think it feels very, very likely,
although It's really hard to say these
things with any certainty by the way, as
very, very likely that the high increase
in energy prices in electricity prices in
particular in Europe, has been driven by.
I think kind of climate minded
laws, which may be good laws,
but are difficult to sustain if
you're the only person doing them.
The question for me is
how important is that?
And how much does it actually matter
if you're a continent like Europe
to have high electricity prices?
That's what I'm un unsure about.
Pieter Garicano: I think, because
this often the high energy prices
obviously matters a lot for like
very energy intensive industries.
the kind
of paradigmatic country here, of course
is Germany, which has like a generally
very elevated level like manufacturing
GP for a country, if it's like wealth
and if you look at the German economy,
it makes sense to date the slowdown 2022.
I mean, COVID, I mean they
certainly didn't recover from
the COVID shock very well.
But through 2020 until then, the
German economy is, I think you would
be hard pressed to make the case
they was performing very badly.
They were growing at 2% per year.
They were growing much
faster than Southern Europe.
They were basically diverging
despite being like the frontier.
And so Germany's your energy
intensive country, it's the
one where price rise the most.
It's hard to say that pre, pre Ukraine
war shock that made such a big difference.
Aria Schrecker: Yeah.
How do French energy prices
compare to, the rest of Europe?
I would assume much, much cheaper.
Sam Bowman: Well, they're a bit lower, but
they export a export lot of electricity.
Speaker: Exactly.
Yeah.
This
Sam Bowman: is, I think that's actually
quite important because, I don't think
that it would be better if France
had autarky for electricity prices.
Because the implication there
would be that you should
subsidize your electricity prices.
Pieter Garicano: Yes.
Sam Bowman: So this is a point that,
Ben (Southwood) and Samuel (Hughes) and
I have made in the past, which is the
question shouldn't be 'Why is France
struggling economically?' It's obvious why
France is struggling economically, right?
Like it's a very, very, very
heavily regulated economy.
We've already talked about
some of those regulations.
It's very highly taxed; for a
worker to bring home a comparable
amount of money in Britain versus
France, so about 60,000 euros.
In Britain, the employer will have
to pay a total of about 97,000 euros,
in France the employer will have to
pay a total of about 137,000 euros.
Aria Schrecker: That's insane.
Sam Bowman: So, absolutely, yeah,
gigantic, because social insurance
contributions are absolutely enormous,
in France, compared to the UK at least.
So they have a very low retirement age.
they've only raised it
very, very recently.
Pieter Garicano: They're
going to bring it down again.
Unwinding reforms.
Sam Bowman: They're probably
going to bring it down again.
Aria Schrecker: But
young people don't work.
Sam Bowman: They also have very,
very high, rates of unionization.
They have lots of strikes as we know.
But they're roughly as rich as the UK is.
Right?
And this could be a real repudiation
of the idea that economics is true.
It could be well you could do whatever
you want and you could still be
roughly as rich as each other.
Why wouldn't you have a highly
regulated economy with everybody
retiring at the age of 62?
Aria Schrecker: What's really galling
to me is how many- if you go down
the sort of world's richest people,
there are so many French people
before you hit a British person.
It really upsets me.
Sam Bowman: Well, France has some
amazing companies actually, but, the
argument that we make is that they
can afford to do all those things
because they get the basics right.
Because they have built much more
freely, they have millions more
homes in France than the UK does.
Aria Schrecker: I guess you would
say, in the places of France
that are most productive as well.
Sam Bowman: Not- yes.
So Paris has like significantly grown
since the war compared to London,
which just has not grown since the war.
Paris has tripled in geographic
extent since the 1940s whereas
London just hasn't changed at all.
they built vastly more motorway.
they toll their motorways, so they're free
flowing,all the, all the things like that.
They build much, much, much more,
mass transit infrastructure.
People all know, everybody know about.
Yeah.
French trains are great.
Roads are great.
Houses are great.
they've built like 27 Tramways,
I think in the last 30 years,
whereas like the UK has built three.
And obviously as we wrote in a good
Works in Progress article a few
months ago, they nuclearized to
absolutely like an astonishing degree.
They, France gets something like 65%,
66% of its electricity from nuclear.
It built 50 reactors in 10 years, in a
period between the 1970s and the 1980s.
This was a state led program, by the way,
I'm not telling a kind of, oh, France
is a free market country kind of story.
Yeah.
the point is that they
actually built this stuff.
They actually got this stuff.
And our argument is that this sort of
allows them to spend down, this has given
them loads of wealth that they have
chosen to spend down via having heavily
regulated economy and stuff like that.
France does also have some really
impressive companies, like Air Airbus
is to a large extent a French company.
Pieter Garicano: I was going to
ask, which is that if you look
your French people rich list, if
you look at what they actually do-
Aria Schrecker: I they're mostly
the inheritors of fashion houses.
Pieter Garicano: No, but
that's important, right?
The very rich French people
are in industries which
are very heavy intangibles.
All their wealth intangibles.
And in this case, it's not ideas
to like and tech, it's like brands.
Brands are like the
ultimate form of tangibles.
It's quite surprising actually, that
this kinda like very material input story
notwithstanding the way you have this like
really crazy French long tail and where
they totally trump Britain for example.
Aria Schrecker: That's got to be culture.
Sam Bowman: Yeah, and history, right?
Like France for a long time was
the like superpower of Europe.
They also have an incredibly
bountiful land, they have
lots of different climates.
They have incredibly fertile
farmland, France is an amazing
country especially if you are in
a kind of pre-industrial world.
France is an amazing country and for
a really long time, all of European
culture was downstream of French culture.
Italy is another example of a country
that is spending down like the Renaissance
or maybe even the Roman Empire, there is
a huge amount of accumulated, inherited
capital, human capital, whatever.
In some cases It's like literally the
land is the way it is and is beautiful
because there have been people there
for thousands of years and they've been
relatively rich for thousands of years.
Like Florence obviously is just
like a thing that is left over from
the Renaissance and it's still an
amazingly great place and productive
place and culturally important place.
But anyway, yes all this is a kind
of getting away from the point about
energy where, remember that most of the
energy intensive industries that people
talk about use gas, not electricity.
Like energy intensivity usually means you
are gas reliant and gas prices did only
spike around COVID, and around, not COVID
actually, but sorry, the Ukraine war.
Like there it is correct that the spike
in price coincides with the Ukraine
war and the Draghi report does have,
I think, some pretty like incredible
charts showing certain industriessteel
and like very energy intensive industries
have had like gigantic contractions
since the beginning of the Ukraine war.
The question for me is electricity,
which has not tracked gas prices.
Electricity has been rising and
rising and rising for 20 years.
And there, I think there's a plausible
story that electricity is a very
important input to everything;
electricity is a thing that all
businesses require and like often
spend quite a lot of money on them.
Like they spend it on air conditioning,
they spend it on just general activities.
And there I can imagine like a fundamental
input that every business is reliant on,
although not relatively energy intensive
businesses being something that rises
and rises and rises in cost over this
period - that being an important factor.
But actually, I don't know.
I don't think there is good evidence
as to like how important electricity
prices are to growth or to output.
Pieter Garicano: I think especially if
you're comparing like Charleston to Lille.
Where it's I can't imagine that
spending on electricity is more
than like low single digits of GP.
Sam Bowman: Yeah.
Pieter Garicano: And so I'm hard
pressed, even if it doubles or I think
in Britain's quadrupled the last 20
years is my understanding, but even
if that quadruples, it's like it's
not going to explain the - I wonder
if - one story you could tell is - story
would be something - a syncretist
story would be that for some parts of
the US there is a big priority to gap.
But actually if you're comparing like
Charleston or Savannah or Dallas to
Lille, there, you're actually, if you
adjust for purchasing power and then
adjust for like hours worked, you actually
end up with a remarkably similar economy.
That would be my intuition.
Sam Bowman: One.
So one other, theory before we move on to
I think kind of, so what is to be done?
What's actually, what, what is to be
done is one that I heard from Tyler
Goodspeed, who's an economist in the US
and his argument is that, the culprit
or the smoking gun in terms of timing
is after the financial crisis, the Basel
three, the Basel three Accords, which
are a series of financial regulations
that are applied globally by all
developed countries, sign up to these bit
in a much more important way in Europe
than they did in the United States.
Because what these did was say
that larger banks have to be more
prudential about how they lend.
And that mattered a lot more in Europe
than it did in the US, because number
one, Europe has much more large banks.
It's got a much more
consolidated banking sector.
The US has like thousands of local banks
as well as some really big national banks.
All the store European countries
have like a handful of big banks.
By the way, as a kind of consumer,
that's much better, right?
Like the US banking sector is notoriously
primitive and terrible, horrible to use.
You have to send checks to your landlord
to pay your rent and stuff like that.
People using credit cards, to like
do basic transactions and the
credit card margins are huge and
stuff like that, blah, blah, blah.
Whereas in Europe, it's really easy
to do cash transfers between people.
Venmo doesn't exist.
There's nothing like Venmo in the US in
the UK because we just don't need it.
Aria Schrecker: We just don't need it.
Sam Bowman: We just do
bank to bank transfers.
Yeah.
so that's one part where you
just have more big banks.
So the regulations bite on a much
larger fraction of the banking sector.
The other is that, much more lending or
much more business financing in Europe
comes from banks than it does in the us.
So in the US a much smaller fraction of
lending is kind of clamped down on and
made to be prudential than in Europe.
In Europe you get much, much, much
more, a much bigger share of like
where businesses get their money
from becomes cracked down on.
Now.
I think this is a really
interesting argument.
I don't know, I'm not able to assess it in
terms of like how big the effect size is,
but I think it's like quite interesting
and I do think that the one thing it
really has on its side is timing.
It does seem to coincide like really
nicely with the, I think your point is
well taken, Peter, but it's pretty clear
that Europe, if we were sitting here in
like 2004, we'd be talking about France
and Germany's unemployment problem.
We wouldn't be talking about-
Pieter Garicano: And in Britain talking
about the incredible growth story.
3% growth would be remarkable.
Sam Bowman: Exactly.
We wouldn't be talking about the
massive productivity, slow down.
Certainly not that
Europe was experiencing.
Pieter Garicano: No, and
the bank story is striking.
Right?
I think 35% of all, European
savings are in current accounts.
Sam Bowman: Yeah.
Pieter Garicano: Which
is just, really remarkable.
And the other remarkable thing is
that, policy makers kind of treat
the fact that more money isn't in
these current houses a problem.
Right?
So the dragging report has a
sister, a forgotten sister called
the letter report, by Roberto Letter.
another big, European grandee,
and the letter report's about
supposed to be a single market.
It generally contains like
less information, interesting
information in graphs than Draghi.
So that's why it had no impacts.
But one very telling section is that,
in the preamble it talks about the fact
that, Europeans have 300 billion euros.
I think it's roughly
1% of European savings.
No, should be less than that,
but 3 billion Euros exposed to
the American equities markets.
And rather than being like 'Wow,
this is great that you still like
get to transfer over some surplus
and the returns flow back to
Europe', this is like a big problem.
He's like 'This is a big issue.
Why are the savings flowing to the US
versus, staying here?' And so I think both
the actual regulation, also the attitudes
of capital markets are really alien.
If you see this as like an American,
where you think like it's excellent to
have lots of exposure to capital markets
and have a very unfettered capital.
Aria Schrecker: I wanna synthesize
our conversation of what the problem
is, where it seems I think we are
basically on the same page that
there are several different courses.
I think if Europe had only made one - the
difference between the UK and France
- if Europe had only made one of these
mistakes, it wouldn't be so big of a deal.
But it's the regulations in general
mean that it's harder to develop tech.
The labor markets mean that
it's harder to take risks.
The energy markets mean that
manufacturing is punished,
but also probably lots of
other businesses are punished.
There's there's an attrition of like
several different things which together
have combined with like a slowdown
over the past, three decades or so.
Pieter Garicano: Yes.
And certainly if you look at the last
like 10 years, there has been like a huge
proliferation of like European rulemaking,
which must impose significant drag.
And firms report this, right?
Firms also report your
energy story a lot.
Sam Bowman: Good for them.
Pieter Garicano: It's remarkable.
If you asked founders about my - when
I asked startup founders about my
lead market story, they're like
'No, it doesn't really matter.
It's mostly culture.
People don't wanna work very hard,' but
they've had a problem with firing anyone.
Sam Bowman: Yeah.
Pieter Garicano: And inversely,
your energy story shows up - you
get every year you have a survey,
what's inhibiting investment?
And like a 6% all company survey in
Europe, no matter the size, literally
could be, not even manufacturers of
6% all coming surveyed, report high
energy costs are inhibiting investment.
Aria Schrecker: What are
we gonna do about it?
Sam Bowman: So there
two questions actually.
One is what should be done?
I think a more interesting question
because I can tell, I can infer
from what we've all been talking
about, what we think should happen.
I am more interested in
why nothing is happening.
Like I am very, very confused.
And this is a general point.
We've spoken entirely about economics
for this conversation, but if we
were talking more broadly, we'd
be talking about immigration, we'd
be talking about Islam and Europe.
We'd be talking about maybe freedom
of speech, things like that.
All of which are like very
important live issues in Europe.
The Ukraine war is another one, where
large parts of the electorates of
these countries are very much out of
step with the mainstream political
elites and political parties.
Pieter Garicano: Maybe not
Ukraine War, but the other ones.
Sam Bowman: Maybe not Ukraine War.
What
I find constantly very confusing
is why it is or why it appears to
be the case that, European leaders
seem to be either paralyzed in the
face of all of these problems and
we can just stick to the economics.
Because we haven't gone into the other
issues at all in this conversation.
Like, why do they seem
totally paralyzed here?
Or even oblivious, it's not even
clear to me that they are aware of the
problems as we believe that they exist.
do you have a good story for that?
Pieter Garicano: So, one extremely
simple story you could tell is
it's just a representation gap
story, or a firewall story.
The Brandmauer.
The Brandmauer basically is
the commitment of European
center right parties to exclude
the far right from governing.
And this is a commitment for like very,
I think sensible and understandable
reasons, which you might have lots of
reasons why you disagree with the far
right and think they are both not just
that they often hold, bring reprehensible
views, but also that like they're
just not, haven't shown themselves
to be very competent in governing.
And so you just basically exclude
categorically and that basically means
that you as a center right party, which
might have perhaps slightly like more
like derogatory instincts, are committing
yourself to perpetually govern center left
not nec- doesn't mean that like not, and
it doesn't just mean oh, your, your policy
-
You get like a weighted average of your
views, but like you are negotiating
hand going into that it's greatly
weakened if your counterpart knows that
in the end it's take it or leave it.
Sam Bowman: Yeah.
Pieter Garicano: So that'd be one story.
But I think the reason why I don't
think this works for the EU overall
is because in countries where you
see a kinda grand coalition form
of governing very consciously - like
Germany, like much Northern Europe now,
is that you actually love paralysis.
Like the net result of putting
together like the center right and
center left is that like they count
each other out and nothing happens.
But for the EU I think the story doesn't
work as well because the story of
the EU for the last 10 years is that
they've been insanely productive.
People love to tell like how oh,
the Americans have these checks
and balances paralysis by design.
But like the American system is like
basically extremely like majoritarian.
It's almost like 50 plus one
compared to how the EU is designed.
We have to like align the European
Parliament with the council, which
represents for instance the governments
of 27 different sovereign member states,
Sam Bowman: All of
which have a veto right?
Pieter Garicano: All which to a veto.
Yeah.
Aria Schrecker: And yet it's still able to
throw directives out all over the place.
Pieter Garicano: They - five times
higher - This is a stat from driving
reports kind of dodgy, but they
basically say it's like four times more
relative acts per day compared to the US
Aria Schrecker: This I guess implies
that, European elites are actually much
more aligned than you would expect their
equivalent American counterparts to be.
Pieter Garicano: So I think it
just happens to be the way the
Brussels system is designed.
Aria Schrecker: Okay.
Pieter Garicano: And last thing I say
about the Europeans, which even more
surprising is the Grand Coalition in the
EU is like four parties ranging from the
greens, the liberals - it's so unwieldy
and they're constantly doing things.
So, and this in the EU story, it's
quite interesting and this, I don't
think something was widely understood
or known is that the formal way laws
used to get made is that the commission
proposed something and then the council
and parliament go back and forth in
four different rounds with like public
votes where you have an amendment, it's
like basically the way you expect the
house to work or the parliament to work.
You have different readings and
then at the end everyone publicly
votes in the final package.
That's the way it's supposed to work.
But since the crisis, they've
adopted the financial crisis,
a system known as a trialogue.
The trialogue is basically that
you as the parliament, empower a
person rapporteur to represent you.
The council empowers the council
presidency, which is a country
which rotates randomly every six
months, empowers a representative
and the commission sends their team.
And what happens is that these three
people meet in a room, none of them
have necessarily very strong incentive
to press on the breaks because in
the commission - the commissions
don't have very much power anyway.
So the only way you can do
things is make new laws.
It doesn't have much money to spend.
So if you're a commission civil
servant, your incentive is law making.
The council presidency
only has six months.
And so ,basically it's your
only chance to affect this issue.
And so you're much better off like
doing - you also want to have a big win.
Usually the council president
is represented by a civil servant.
So it's just some guy who would
like to have a big win CV.
And the parliament, the person who becomes
rapporteur is almost always someone who
really cares about the issue and has been
selected through a process where in this
case they come out of a specific committee
and people on that committee are the
people who really carry about the issue.
And so you might say, even though like
it's -, why did the Europe- why did the
German CDU - vote in favor of banning
all combustion cars in Europe by 2035?
It's hard to think of.
It's like the reason why they did this
is because the EPP people, the CDU
people, the Christian Democrats who
are on the environmental committee
happen to be much more out of step.
And so along the way the incentives
for the people who are actually making
writing the laws, are just not the
incentives faced by the parties back home.
And then what happens is the final
step of the sausage making is when the
bill is created, and when it comes to
parliament for a vote, this is when the
Grand coalition dynamic matters a lot.
Because what you say, when you
come back to your fraction, to
your parties who say, look, this is
the best deal we're going to get.
This is a deal between us, the center
right, the center left, the greens,
the liberals, is extremely fragile.
And it's take it or leave it.
It's like you, the CDU might not
want to do combustion car ban,
but if you don't vote for this,
you'll never get anything else.
Aria Schrecker: So your story here is
something like the policy makers are
extreme technocrats and also single
issue people who really care about things.
So we end up in a sort of 'everything
is a thing where you get the privacy
people get their GDPR, the green people
get all of their little habitats
regulations' and they're like, right.
Sam Bowman: It's like
government by hobbyists,
Pieter Garicano: Government by hobbyists.
Yes.
Sam Bowman: So that's pretty depressing.
That's pretty bleak, because
I don't see how that changes.
I want to be optimistic.
It is worth noting a few
things, a few reasons to be
somewhat upbeat about Europe.
First of all, and it's easy to forget
this, Europe is much richer than
almost anywhere else on earth, right?
Like its growth rate is not that
good, but its level of output is
really, really, really impressive.
It is much, much, much richer
than almost anywhere else.
That's really important.
People,
Aria Schrecker: I'm still on
the fence about whether I'd
rather live here or America.
Sam Bowman: Yeah.
I mean, okay.
That's great.
I think that's a really
important point actually.
Sorry, I'm being, I'm being jokey.
European cities are much safer
than American cities are.
The level of squalor that you get
in American cities is much worse
than it is in European cities.
And the cities themselves, the towns
and cities in Europe, because of
when they were built, often are a
lot more beautiful, a lot walkable,
a lot more livable, stuff like that.
Europe also has really, really,
really precious valuable things like,
basically very strong rule of law.
Basically very strong
private property rights.
Basically very strong freedom of
speech rules, despite the problems
that it does have, I think with
freedom of speech, it has things that
are really hard to will from nothing.
And if you're looking at somewhere
like a Latin American country, for
example, all of those things are a
lot weaker and a lot harder to build.
Although, there are people
who are trying to build those
things, but it's much harder.
It's an uphill struggle to do that.
Europe also has some really
impressive companies, right?
We've got a piece coming soon on
ASML, which is essential to the,
global semiconductor industry.
It has Airbus, it has the most
impressive and important airline
manufacturer, which you mentioned earlier.
there are some impressive tech
companies, especially if you
include pharma and biotech.
We don't need to go into them.
DeepMind is based in London,
which is sort of in Europe.
There are like plenty of
-
Pieter Garicano: It is in Europe.
Britain's moving away...
Sam Bowman: well, I think the UK
is a special case, but yes, it's
geographically in Europe for sure.
And it's adopting European
labor laws, which is great.
So there are all sorts of things
that I also, by the way, think as as
a video gamer, as a self-identified
gamer, I think it's notable that
European video games are really good.
Like Baldur's Gate three, just on
the games that I play personally,
Europa Universalis V, brilliant.
Baldur's Gate three, brilliant,
Belgian game, Kingdom Come
Deliverance Two, brilliant.
The Witcher three, the Witcher
series, even Cyberpunk, which is
a bit of a disaster- Europe in one
area of tech, European companies
do absolutely brilliantly and I
think are at least as good as, if
not better, collectively than their
American and East Asian counterparts.
So like it isn't completely a
dead zone, it's just that these
are pockets of success around the
continent rather than being the sort
of big giants that we talked about.
Pieter Garicano: And I think
these things are probably going
to become more important over
time as we become wealthier.
The people, these things are basically
things that are like luxury goods that
we demand as we get more free time.
Sam Bowman: Your argument is that Europe
should just become a holiday destination.
Pieter Garicano: No, no, no, no, no.
My argument is that like
you- the lower bound-
Sam Bowman: Yeah.
Pieter Garicano: The flaw is set by the
fact that worst case scenario, everyone
in the world will still wanna come here.
And many countries don't have that.
Don't have that to say for themselves.
Right.
Basically as a iron law since the
dawn of modernity, basically as
people have more free time, they
just spend more time in Europe.
This started with the British going
to Greece,, the grand tour, the
Americans in the eighties and nineties.
And now of course, we're recording
this in London and you see lots
of people from all over the world
coming here and that's gonna stay.
Sam Bowman: Okay.
So on policy, what, if anything,
is the reason to be optimistic?
It's hard to imagine Europe
performing its labor laws.
Aria Schrecker: I think the consensus
on nuclear power is probably
going to break at some point.
I think like the-
Sam Bowman: The anti nuclear power?
Aria Schrecker: The anti
nuclear power consensus.
Yeah.
I think France's success compared with,
data centers and people, everyone does
want data centers in their country, and
I think people are going to start to make
policy decisions that make that happen.
I think that probably means
like we are going to get more
nuclear power across Europe.
Not every country.
Sam Bowman: I actually suspect that it's
more likely on energy for what it's worth,
that, one of the consequences of the
populist right of the far right come to
power is that there is a big shift towards
fossil fuels again, because the cultural
like valence of gas at least, and maybe
coal is like it's anti-woke basically.
And I suspect that that's more
likely than nuclear, but we'll see.
Pieter Garicano: Interestingly, the Dutch,
right and far-right are very pro-nuclear.
It's a huge thing for them.
They love nuclear and they
wanna build 10 new power plants.
I think my answer would be that
it's extremely - it's gonna be
very member state dependent.
I don't see why - what the Dutch want or
the Swedish want, the Nords want basically
is for the EU to set the basic punition
in place to protect a single market,
to create a single amount of capital.
And I think in those countries
specifically, I don't think we have
that much evidence that the ability of
policy to self-correct is as broken
as it is, for example, in Britain.
And we see now the Dutch recently received
their version of the Draghi report.
The Wennink report, the former ASML CEO
wrote, published last week his report
for how the Dutch should fix the country.
Sam Bowman: So many reports!
Pieter Garicano: But the coalition
agreements, the incoming government
agreed with all the recommendations.
Yeah.
They just want to do it.
Sam Bowman: Yeah.
Pieter Garicano: I think members of
a members state it's very different.
I think French endowment's much worse.
The other story, which is worth
mentioning is that there are
like some like win-wins here
on labor markets, for example.
There are models which exist that
protect the workers or at least
compensate the workers in the case of
insecurity, but also allow for much
more flexibility on public companies.
So one model to think of is Denmark
has more complex security where you are
insured with a union, an 'a-kasse',
you pay some fixed fee every month, and
then if you are let go, and the Danish
employer has the right to let you go,
basically for any reason at any time.
You receive, up to 90% of your
income for up to two years.
And along with that come really strong
requirements from part of the Danish
government for you to find new work.
They spend roughly 2% of GDP on what they
call active labour market policy, which
is where they basically match you, they
subsidize future employers to hire you.
They subsidize, universities
to take you on as a student.
And the net result is that Danish
workers are still very protected and
very compensated, but also, Danish
companies are much more agile.
And like other countries, the Swiss,
the Austrian, to a lesser degree the
Dutch have like variations of this.
And that might be, for example, the
kinds of positives we can think of.
If we think of things that are both
going to protect the European social
model, which people clearly want, is
very important, but also might add the
necessary dynamism we need to innovate.
Sam Bowman: Well, I-
Pieter Garicano: Your answer?
Aria Schrecker: Yeah.
What are you optimistic about?
Sam Bowman: What am I optimistic about?
I'm not really that
optimistic, to be honest.
I'd like to say that I was, I
think that the idea that you
could kind of flex security in
some places, that sounds great.
I feel like the kinda near term political
prospects, for Europe just feel very- the
thing that I feel when I look at the UK or
the US there are like clusters of people
who are very actively working, trying
to change things and I think they're
doing, relatively well actually, at
spreading good ideas and things like that.
Now, possibly because I'm only an
English speaker, but I see that much
less in Europe and I'm much less like
aware of who those groups are in Europe.
And so maybe it's just
because of who I am.
Maybe it's just because
where I'm standing.
I just don't see as much kind of
energy and urgency around changing
things in any specific groups.
And the people I do know in Germany, for
example, feel pretty desperate and I feel
like pretty glum about the situation.
I could be totally wrong.
I think I am a lot less pessimistic about
Europe in terms of the actual level, I
don't think the place is gonna fall apart.
I don't think there's like a European
civil war coming on or anything like
that, but I think that it's much harder to
imagine any major European country doing
like a massive course correction the way
I think like the UK might do a massive
course correction, or the way I can
see America kind of trying to with not
a lot of success so far has to be said.
To me, it feels like Europe is
still at the kind of denial stage.
There is a fairly cliched point
that I think is true, that
countries need like external
threats to get their act together.
And you look around the world and a
lot of the most highly functional
states are countries that have a scary
neighbor that is threatening them.
And even the US during the Cold
War, I think is an example of that,
where like the external threat does
really help you focus the mind.
Doesn't always work, didn't work
for Poland for or for the Polish
Lithuanian Commonwealth, but it does
help and the more Europeans feel that
from Russia may be the more impetus
and opportunity there is for the
reformers to get things together.
Aria Schrecker: So on that
almost optimistic note...
Sam Bowman: On that nearly
optimistic note, thanks guys.
This has been very interesting.
If you're watching at home or
listening at home and you want more
conversations like this, check out
the Works in Progress print edition.
Our next issue has a piece
by Pieter on the labor market
rules that he was talking about.
And we also have in a forthcoming
issue, a really interesting deep dive
into ASML, which is probably the most
important company in Europe right
now, and certainly one of the most
important companies in the world.
So thanks very much for listening or
for watching, and see you next time.