Creating a European Culture of Innovation

(This is are the prepared notes for a speech I gave at Lift Basel on October 30, 2015)

Good evening.

It's a great pleasure to be here with you. You are among the brightest and most creative innovators in Europe. We meet at a critical juncture. At stake is the future of Europe. And we, the innovators, entrepreneurs, scientists, activists, and artists, need to step up and take ownership of this future. Because if we don't, Europe will continue its downward trajectory that it's currently on, and become what it many places it already has transformed into - a museum of history.

Let's not fool ourselves - things are not looking too great. We only need to look at the situations in some of the southern European economies. In many countries in Europe, unemployment rates are still above 10%, seven years after the crisis. But what's worse, you can go almost anywhere in Europe and talk to young people, and with a few exceptions, you will hear them pessimistic about the future of Europe. Many would take the opportunity to leave if it came along. The youth unemployment rates are now so staggeringly high that the problem seems unsurmountable. But is it? Let's take a look a the data.

The information and communication technology sector is now the dominant economic driver of growth. Think Apple, Google, Facebook, Amazon, Uber. Noticed something? Not a single European company. Only 1 out of 4 dollars in this sector are made by European companies, and all the indicators for the future are pointing down. Some numbers are even more dire: when you list the top 20 global leaders of internet companies that are public, you know how many are European? Zero. And among all publicly listed companies in the digital economy, 83% are American, and a mere 2% are European. 2%!

There's something that's even more worrisome. Software is eating the world, and all sectors of the economy are being disrupted by software, but the software section is where the predictions for Europe are most dire. This is a real problem. The disruptive process is so fast nowadays, if you are not careful and miss a key technological development, you are basically gone within less than a decade. Remember Nokia? The hotel industry is being disrupted by AirBnB, an american software company. The transportation industry is being disrupted by Uber, an American software company. The Swiss watch industry is now being disrupted by Apple, an American software and hardware company. Again, let the numbers speak for themselves: the 200-500$ segment of Swiss watch sales has collapsed by 20% in the past three months. Other domains where Europe has been strong are now existentially threatened. Volkswagen may not survive the disaster they created for themselves. But already before the Volkswagen scandal, it was clear that the most exciting technology for cars doesn't come from Europe anymore, but from the US; from Tesla, from Google, apparently from Apple, and certainly also from Uber. In the meanwhile, we have the new Volkswagen CEO on the record last month saying that autonomous vehicles are a hype. 

Ok, so some of the old European companies are not nearly moving fast enough. What about the new ones, the upcomers, the startups? Let's look at the top ones, the ones whose valuation is more than 1 Billion dollars - the so-called unicorns. Europe has now 40 of them, and the number is growing, which is good. They have a collective value of 120 Billion dollars, which is also good. But that is still less than half of the value of Facebook alone. Put differently, the value of all European high-value tech companies is less than half of your mum's favorite social network. We clearly have a long way to go. And we need to go much faster - to catch up, and then to take the lead.

So where's the problem? Some say it's VC funding, which is only partially true. Yes, the culture of VC funding is probably less mature in Europe than it is in the US, especially for stage A, B and C funding. But money will find its way into good ideas and market opportunities one way or another. Others say it's simply the European market, and European regulation. I think that is an illusion. Look at AirBnB, the US startup that now has a valuation of over 25 Billion dollars. It was started as a three person startup in California's Y Combinator, but it now gets over half(!) of its revenues from within Europe. And by the way, San Francisco is probably one of the worst regulatory environments you can find yourself in. AirBnB is currently facing huge battles in San Francisco, and a Californian judge recently ruled Uber drivers employees, causing a minor earthquake in the booming sharing economy. Indeed, California is probably one of the most regulated of the American States, and yet it does exceedingly well.

I think that the problem is actually quite simple. But it's harder to fix. It's simply us. We, the people. We, the entrepreneurs. We, the consumers. I have lived in the San Francisco Bay area for more than three years. What's remarkable about the area is not its laws, or its regulations, or its market, or its infrastructure. What's truly remarkable is that almost everyone is building a company in one way or another. Almost everyone wants to be an entrepreneur, or supports them. Almost everyone is busy building the future. Indeed, you can almost physically feel that the environment demands it from you. When someone asks you about what it is you are doing professionally, and you don't respond by saying that you're building a company, they look at you funny, as if to say, "then what the hell are you doing here"?

Needless to say, for entrepreneurs, this is an incredibly exciting and stimulating environment. You are one of them. You are part of the ecosystem. And like most of them, you will often fail in one way or another. But since everyone is failing all the time, it's completely normal. You just keep going, you fail better next time, until that one time when you don't.

It's not a trivial point I think. The other day, I was in Turin in Italy, and I desperately needed a coffee. I walked into the next random coffeeshop, where I was served a heavenly cappuccino, with a chocolate croissant that still makes my mouth wet when I just think about it. Was I just lucky? No - all the coffee shops there are that good. Because the environment demands it. Sure, you can open a low-quality coffee shop in Turin if you want to, but you'll probably have to file for bankruptcy before you have the time to say buongiorno. The environment will simply not accept bad quality. In another domain, I had the same personal experience when I was a postdoc at Stanford. Looking back, all of my best and most cited papers I wrote there. I don't think it's coincidence. Every morning, as I was walking across campus to my office, I could sense the environment demanding that I do the most innovative work - if I didn't, then what the hell was I doing there?

So this is my message to you. I'm asking you to create those environments, both by doing the best and most innovative you can, but also by demanding the same from everyone else around you. These two things go together; they create a virtuous circle. Since everyone knows what doing the best and most innovative work means, allow me to share some thoughts on the latter part - demanding it from everyone else. 

It means that we are not accepting the status quo. It means that we continuously ask ourselves, our collaborators, our co-workers, and our leaders, how we can do better. It means that we put our wallet where our mouth is - that we stop buying products from companies that don't innovate, and that we support those that do. That we embrace technology, quickly adopt new tools, buy from startups. It means that we speak up, in person, on social media, on blogs, etc., when we see conservative, backwards thinking. And let us not be afraid to speak up even when we seem to be alone in our views. In fact, that may be the most important time to speak up. Recall the child, in the emperor's new clothes, who ridiculed the king for not wearing any clothes at all - her initial remarks sparked a chain reaction, with everyone else suddenly feeling comfortable pointing out the obvious.

It also means letting go, and disassociating from people who are not moving forward as fast as you'd like. This may sound harsh, but really, it isn't. In my career as both a scientist and as an entrepreneur, I have seen the painful moments when people realize much too late in the game that they were on the wrong track. You can undo many things in life, but you cannot roll back time. Last year, I started a company with a friend from Stanford, and we got into the famed Y Combinator program. We failed so hard, I can't even begin to describe it. We didn't even get traction. The partners at YC dropped us like a hot potato. At the time, I felt incredibly frustrated - I thought it was their role to help us get on track. But in hindsight, I realized that they were doing us an incredible favor, and letting us fail fast, instead of letting us morph into one of those Zombie startups that end up going nowhere, but suck up all the energy and time of their founders for too long. Time they could spend exploring the next idea. Time they could spend with family and friends.

And this brings me to another point about demanding excellence and innovation. I hope it was clear that I've spoken exclusively about work. I do not for a moment believe that excellence and innovation demand making inhuman sacrifices. They do demand very hard work, dedication, and commitment, for sure. But what do you want to be written on your graveyard? "He created a billion dollar company" or "he was the most wonderful father and friend anyone could imagine"? Ideally both, of course. But you are going to have regrets. Choose them wisely. 

There is also something that we shouldn't do, but unfortunately is a very common European tradition. It's to complain, and wait for politics to step in. To think that if only we had the right political conditions, we would be just like Silicon Valley. Don't get me wrong - there is much that can be improved. Politics can make things harder, and it can make things easier. But it cannot on its own create innovation. It can support it a little bit, and it should. And if you are working in the political sphere, working to make life easier for startups and innovation, I say: all power to you! I support you, I will vote for you. But to the rest of us, I say: just do it. Don't ask for permission, ask for forgiveness if necessary. If you are waiting for permission, you will wait for the rest of your life. Most rules exist for a simple reason: to protect incumbents. Don't ask for permission, just go and do it. 

My final point on this topic is probably the most important one, and it is about you. I strongly believe in role models, and I believe that the only way for Europe out of the current mess is to have strong role models. Role models are absolutely essential. Take a look at Facebook. It's easy to quantify the economic value that Mark Zuckerberg has created through the company. But think about the entire generation of high schoolers and college kids he inspired. Think about all the companies that were, and will be, started by young people who want to be the next Zuckerberg. The next Sergei or Larry. The next Steve Jobs. They were all in their early twenties when they started their companies. I bet the value of simply having these role models - measured by the companies they inspired - approaches or exceeds the value of the companies they themselves created. 

I've had my own share of role models, right here in this very town. I used to work in two software startups -  before they were called startups - that have both gone on to become very successful. The first was called Bidule, which later morphed into Day Software. Its technical founder, David Nüscheler, is perhaps the closest equivalent to Mark Zuckerberg that we have in Switzerland. An ETH dropout, David co-founded the company and brought it to IPO in the year 2000. A decade later it got acquired by Adobe for over a quarter billion dollars. The second company was called obinary, which later turned into Magnolia. In 2003, the two co-founders Pascal Mangold and Boris Kraft realized their company was faltering, and so they decided to take a huge risk and develop a new product which has gone on to do extremely well. They just moved into a brand new building specifically designed for the company, which now employs close to 100 people. 

What these founders have in common is that they were smart, and took a chance when they saw an opportunity. They didn't wait for a more mature VC market, for better political conditions, or for anyone's permission. They just went a built these companies. We need to talk more about them. We need to celebrate them. We need to make sure they want to work here, not anywhere else. Many people who have worked for these two companies have since left and started their own companies. And that's of course how you build a thriving startup environment. Not by government mandate, but by letting smart people innovate, by letting them get back on their feet when they stumble, and by celebrating them when they succeed, because if they do, we all do.

And so we need you to be our role models. We need you to show what's possible, beyond what we believe is possible. It may not be easy, because you may still find yourself in an environment that does not demand innovation - or worse, even in an environment that actively dismisses it. I am here to ask you, please keep going, keep creating the future. When you are being dragged down by the doubters, by the know-it-alls, but the why-do-we-need-thisers, please know that there are many like me, cheering you on, waiting for you to be even more daring. Not everybody gets to be at this podium, not everybody gets the chance to have your attention. But I'm telling you now, we are here, and we need you to pull us into the future.

It is not going to be easy. As George Bernard Shaw so pointedly said: "The reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man." Paul Graham, Y Combinator co-founder, advises to "Live in the future, then build what's missing." It is probably the shortest and best recipe of innovation I've ever come across. But living in the future means you will appear a little crazy, and a little arrogant. You are living in the future, after all! And what's worse, many of your contemporaries don't just want to live in the present, they'd prefer to live in the past. The history of humanity is one long fight by those living in the future against those living in the past. To some extent, it is remarkable that we have actually come as far as we have. Every single human invention had to struggle - even things that everyone now takes for granted. From creating timezones to washing our hands between operations, to communicating through phones: Every single human invention that you see around you was once considered stupid, useless, unnecessary, dangerous. But those unreasonable inventors kept going, because they lived in the future, and saw what was missing.

So please, let us all live in the future and build what's missing - here in Europe. I am worried sick that the easiest way for me to live in the future is to buy a ticket to San Francisco. Just like the easiest way for Americans to relive the past is to buy a ticket to Europe, rich in history. I'm asking you to become even more ambitious, more daring, and more demanding, both of yourself, but most importantly also of your environment.

Thank you very much.