Back When Europe Innovated
A Road Trip Down Memory Lane with The Race to the Future
There was a time when Europe led the world. Not just a time but a period. And it didn’t just lead. It dominated. And this wasn’t just ancient history; Matthew Parker shows in One Fine Day that the British Empire’s reach peaked almost 100 years ago. Around the same time, Vienna was home to Hayek and Freud. And later, to the Vienna Circle, which included Albert Einstein and Bertrand Russell, cementing it as the ‘Athens of the World.’ A phrase which itself testifies to Europe’s reign.
Today, the world feels very different. While the UK (a notably estranged member of Europe) still has several highly ranked universities, the continent continues to see its universities fall relative to the US and Asia.1 Similarly, if we use AI start-ups as a proxy for technological prowess, tiny Israel overwhelms both Germany and France. Even stranger, communist China has more AI start-ups than capitalist France, Germany, Spain, Sweden, and Switzerland combined. While the bottlecap meme may be too far, it’s undeniable that Europe is not only behind in creating technology but has regulated companies to the point that it’s even behind in adopting technology. 2
The speed of this change makes the topic fascinating. Even twenty years ago, this outcome wasn’t obvious. To use American politics as an example, it was widespread then to admire Europe as achieving capitalism with more humanity.3 Today, outside of healthcare, that argument is made much less (though maybe
will disagree?). And, while the US has led the world in pop culture for some time, there is something strange in seeing such a large American footprint in the (incredible) Parisian opening ceremony at the Olympics.Today, the zeitgeist of Europe centers on regulation and risk prevention. Both in crypto and AI, Europe has set the goal of reigning in lawless American and Chinese technology.4 Sitting in its thousand-year-old buildings creating regulations to slow the advance of technology, it’s hard not to see Europe as Buckley’s Conservative, ‘standing athwart history, yelling, ‘Stop!’”
Back when…
In her recent book, Kassia St. Clair takes us back to a hungry, innovative, and risk-taking Europe. Her book The Race to the Future documents the play-by-play of an 8,000-mile “race” from Peking to Paris in which European auto companies sought to prove themselves by having drivers make the unbelievable trek from China back to France. Though nominally a race, the event is better described as an automotive feat of endurance in which finishing was the highest possible goal. Still, as St. Clair emphasizes, the newspapers relayed the results like the Tour-de-France, pushing the competitors to move faster, sleep less, and drive harder.
As research by Stanford sociologist Hayagreeva Rao shows, these early races were critical to the car industry’s development. Not only did winning boost sales but competing also brought companies legitimacy. Proving that your brand could finish the race demonstrated that you sold a legitimate product. At these earlier dates (this race took place in 1907), races took on additional importance by showing the industry’s viability.5
What makes this story so entertaining is the sheer craziness of the idea. Paris to Peking was effectively the world’s first episode of Top Gear, with a goofy lot of contestants, each choosing a different (ill-suited) vehicle and then trying to ride through terrain that no car would do well on. There is even a Richard Hammond character that (unfathomably) chooses a motorbike. As you would expect, they encounter an incredible range of challenges, including running out of fuel, getting lost, and struggling with repairs.
While enjoyable as a story, St. Clair elevates the tale by weaving the history of the automobile into the journey’s narrative. We Americans often forget that Europeans invented the car and led in its early development. We are prone to think of Henry Ford as the industry’s beginning, forgetting that Daimler and Benz were both making cars decades earlier.
What happened?
The obvious question is, “What happened?” Why didn’t Europe continue to lead? Of course, this could be a PhD dissertation, but there are a couple of simple points that go a long way.
First, US infrastructure was much better suited for automobiles. This was true in the literal sense that it had many large roads and workers that needed to cover long distances. But, it’s also true that the US had lots of venture funding, making it easier to create car companies.6 Relatedly, the US had a mass market that geniuses like Henry Ford could exploit; selling across state lines continues to be a challenge for Europe.
Second, the world wars had a much more significant effect on Europe. I’ll confess that it was not until I visited London’s incredible Imperial War Museum that I realized how different the US’s experience in World War I was from Europe’s. WWI was fought on Europe’s home turf, consuming its resources and destroying its land. Dealing with this, recovering, and fighting again left a mark on Europe for decades.
Third, as F1 fans will know, in some regards, Europe still leads. Mercedes Benz, BMW, and Porsche are all successful, viable companies. In fact, Volkswagon is the second-largest car company in the world.7 While China and the US may currently lead in some fields (e.g., electric vehicles8), Europe remains an enormous economic force. The interesting thing about Europe’s situation is not that it’s collapsed economically - that’s far from true. The challenge it faces is coming up with new ideas.
Of course, this is all relative to the automotive industry. Europe’s challenges around AI and other technologies each have their own related backstories. To St. Clair’s point, the automotive industry is a great microcosm for these challenges precisely because Europe invested so much in it. Yet, it became symbolic of American capitalism so quickly.
What’s next?
All this makes one wonder if today we aren’t seeing a new version of this cycle with China about to surpass the US. As the US attempts to price China out of electric cars, prioritizing local industry over innovation and climate change, it’s hard not to see echoes of Europe’s past.
Still, as the image on AI above shows, this isn’t true of all industries. And while China has had some brilliant successes in some areas, it is still clearly feeling the effects of the pandemic and struggling with its own infrastructure questions. I will leave China forecasts to those nearer that field (I’ll bet
has some interesting thoughts), but I will note that relative to the world (though not its own past), the US seems to have maintained a surprisingly high tolerance for risk-taking. Deidre McCloskey argues that creating a culture where people see themselves as entrepreneurs and are willing to take risks is essential for economic growth. It is, she claims, the ultimate reason for the Industrial Revolution and progress more generally. 9In that vein, The Race to The Future, in telling the story of a crazy, far-too-dangerous race, takes us back to a time when this attitude was more widespread everywhere, but especially in Europe. While it is possible to have too much of a good thing - perhaps it’s better that we don’t take quite those risks anymore - taking a trip back to such a different era is an enjoyable way to ask yourself if you haven’t become too comfortable in your (American) SUV.
Times Higher Education. “World University Rankings,” July 22, 2024. https://www.timeshighereducation.com/world-university-rankings.
Soltman, Samuel and Mark Gurman. “Apple Won’t Roll Out AI Tech In EU Market Over Regulatory Concerns,” June 21, 2024. Bloomberg. https://www.bloomberg.com/news/articles/2024-06-21/apple-won-t-roll-out-ai-tech-in-eu-market-over-regulatory-concerns.
For example: Alesina, Alberto, Edward Glaeser, Bruce Sacerdote, Harvard Institute of Economic Research, Harvard University, Dartmouth College, National Bureau of Economic Research, et al. “Why Doesn’t the US Have a European-Style Welfare State?,” November 2001. https://scholar.harvard.edu/files/glaeser/files/why_doesnt_the_u.s._have_a_european-style_welfare_state.pdf.
For example: Chan, Kelvin. “Europe Was Set to Lead the World on AI Regulation. But Can Leaders Reach a Deal? | AP News.” AP News, December 6, 2023. https://apnews.com/article/ai-act-talks-artificial-intelligence-regulation-e2bb57eef7ba6d2b0c85ef757fcd3bb0.
Rao, Hayagreeva. “The Social Construction of Reputation: Certification Contests, Legitimation, and The Survival of Organizations in The American Automobile Industry: 1895–1912.” Strategic Management Journal 15, no. S1 (1994): 29-44.
E.g., Klepper, Steven. “The Capabilities of New Firms and The Evolution of The US Automobile Industry.” Industrial and Corporate Change 11, no. 4 (2002): 645-666.
F&I Tools. “Top 15 Automakers in the World | Car Sales Rank Worldwide,” n.d. https://www.factorywarrantylist.com/car-sales-by-manufacturer.html#google_vignette.
Daly, Lyle. “The Largest EV Companies in 2024.” The Motley Fool, July 8, 2024. https://www.fool.com/research/largest-ev-companies/.
McCloskey, Deirdre Nansen. “The Industrial Revolution.” The Economic History of Britain Since 1700 (1981): 103-27.
Doesn't it take a while for governmental powers to catch up with industry, either to milk it for proceeds or to reign in its excesses for (supposedly) humanitarian reasons? A European vs American vs Chinese vs general Asian (including capitalistic tigers and cubs) comparison is instructive, but how not to conflate age of a civilization (and decline), with political philosophy and policy (and various ends in mind), with geographic and cultural differences (size, diversity), with a proposed intrinsic bias towards innovation and its capitalization? The new, the free, the large and diverse, the capitalistic and wealth-seeking all favor innovation.
The question of humanization rides over top of all of that. An important question is what drives entrepreneurship. If it's money-making only or primarily, some other force will have to humanize industry's excesses. But a lot of innovation derives from a genuine desire to help (I think) -- and from a desire to make money at the same time. But the temptation to stray from one's ideals enters soon enough. My daughter loves to support small eco startups, but then they "scale," their quality inevitable declines, and she gets mad at them every time for selling out. My husband works for a hearing aid start-up, and they've faced the all too typical tradeoff between focus on product and company integrity vs pleasing the VC -- and FDA regulators. You can't have innovation and humanistic business without investment, but investors and government authorities will all have their pound of flesh in the end.
Love the car race story. How many entrepreneurs put their literal lives on the line (not just financial) to prove the worth of their products!?
As I was reading this I couldn't help but wonder if the US and China will continue to be the innovators that they are today. Just as Europe was the instigator of economic growth and innovation a few centuries, both US and China might gave way to new (or perhaps former) drivers of innovation? Perhaps Nigeria, India, or Brazil?