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Guest contribution by Ralf Haller, Executive Vice President Sales & Marketing at NNAISENSE

He is responsible for bringing the world’s leading big data, AI, and machine learning startups to international conferences in Europe.

Europe is losing the AI wars. Is it doing enough to get back in the game?

Guest Contributor by Guest Contributor
July 13, 2021
in Guest Contributions, guestblog, Knowledge & Insights
AI

Ralf Haller, Executive Vice President Sales & Marketing at NNAISENSE | Image credit: NNAISENSE

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Europe was able to hold its own in the first three industrial revolutions – but it’s lagging behind in the fourth. Industry 4.0 is being built on fast, wireless communications, information processing, and artificial intelligence. So far the US and China lead in AI, and Europe is in danger of becoming a “technology also-ran.”

According to a report by the American Center for Data Innovation, Europe is lagging behind the US and China when it comes to AI across all metrics, including talent acquisition, research in AI, enterprise development, adoption of AI, data, and hardware.

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As AI is the 21st century’s key to industrial production and information technology, falling behind in this crucial area will harm Europe’s economy and standard of living. To avoid this fate, Europe needs to examine where it is going wrong, and what can be done to get back on the right track. 

So what’s going wrong?

European tech talent prefers to work in the US: Statistics gathered by the Paulson Institute’s MacroPolo project shows that Europe produces 18% of the world’s top-tier AI researchers – but that only 10% of those researchers work in Europe, which means that nearly half are finding jobs elsewhere – primarily in the United States. If Europe continues to lose its most talented engineers to the US and China, the Continent will continue to fall farther behind both those countries.

Europe-based investors are less amenable to startup investments: Historically, European investors have been more averse to investing in tech startups than investors in the US, China, and other countries known for their startup culture. As a result, startups from Silicon Valley and China often don’t even offer their technology in Europe – further shutting the Continent out of the Industry 4.0 economy.

Europe’s wealth has traditionally been built on legacy industries – pharmaceutical, chemical, banking, insurance, manufacturing – making European investors more comfortable with investing in those sectors. A 2020 study by McKinsey shows that, while things are changing, “Europe’s start-ups are still fewer in number, raise less money, and have a lower likelihood of success.”

Risk-averse European culture avoids AI investments: European investors are especially averse to areas like artificial intelligence, because they are even “riskier” than other technologies. Indeed, Europe as a whole gets far less in AI investment than the US or China – furthering the tech gap, according to McKinsey. In addition, Europe suffers from “not invented here syndrome” – a reluctance to embrace any innovation that was not developed by an EU-based company. 

So what can be done? 

Europe needs to implement aggressive policies to encourage startups to innovate, roll back regulations that hamper the growth of AI, and encourage an entrepreneurial spirit that will in turn encourage top tech workers to stay in Europe, rather than seek their fortune in the US. And while governments can help kick off that process, they must ensure that private enterprises take responsibility for encouraging and nurturing that spirit.

European leaders are taking several steps to address these problems. In fact, Europe is set to spend tens of billions of Euros on investments in AI-based tech over the next two years, as well as directly partner with startups. The objective, according to officials, is to jump-start an AI investment infrastructure while encouraging private firms to step out of their investment comfort zones. 

As the AI startup infrastructure grows, the hope is that more private institutions will invest in the technology – leading to the development of a sustainable investor ecosystem, which Europe is currently lacking. Indeed, AI is the best tech opportunity for Europe right now as the technology has many applications in advanced industrial production – an area in which Europe still excels. 

Yet without a major push from the large European corporations that guide the Continent’s economies, government efforts to build an AI innovation ecosystem will not succeed. Private enterprises must invest heavily in startup technology, especially at the later B and C stages that will help those startups bring their innovations to market to solve market needs. Without that kind of strategy, Europe will fall behind – perhaps too far behind to remain relevant.

The first step in fixing a problem is acknowledging that it exists, and while some critics find these EU moves “underwhelming,” the good news is that a lot of Europeans realise there is a problem, and are trying to do something about it. The question for Europe is; will its efforts be sufficient – and fast enough – to ensure that the Continent does not lose the AI battle to the US and China?

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