The Trillion-Dollar Trap
How Europe Was Engineered to Lose the Tech Wars
Grüezi!
It’s summer so forgive a slightly different 7 Things this week!
I just spent a weekend at a fascinating conference in the Piedmont hills. It was close to Ivrea, a small Piedmontese town that invented the personal computer and ended up as a UNESCO monument to industrial archaeology.
The modernist buildings Adriano Olivetti commissioned – radical statements in glass and concrete about technology serving humanity – now house design schools and startup incubators that feel more like cargo cults than genuine revival.
Walking through the old Olivetti campus, past the hexagonal cafeteria and the La Serra complex, you can almost hear the ghost of Europe’s technological ambition rattling its chains.
What happened here – the systematic dismantling of Europe’s most promising technology company – was the template for how an entire continent would be engineered out of the digital future.
1. The Ghost in the Machine
In 1964, a small team of Italian engineers created the future. The Olivetti Programma 101 was the world’s first practical desktop computer – a revolutionary machine that saved programs and data to magnetic cards. NASA would use it to plot the moon landing.
But Adriano Olivetti had already died in mysterious circumstances in 1960, and by 1964 his firm’s American creditors were circling. Within months of the Programma 101’s triumph, the bankers forced the sale of Olivetti's electronics division to General Electric.
There are plenty of conspiracy theories about Olivetti’s demise, but the truth is both simpler and more damning: it was the predictable outcome of a system designed to ensure European technology would never threaten American dominance.
The conventional narrative claims Europe “failed” to build trillion-dollar tech companies through some combination of risk aversion, regulatory excess, and fragmented markets. This comfortable explanation absolves everyone of responsibility.
The truth is more unsettling. Europe didn’t fail – it was systematically prevented from succeeding through intelligence surveillance, capital strangulation, and structural barriers that still operate to this day.
In 2000, European companies were 30% of global technology market capitalisation. Today, that figure has collapsed to 7%. Europe’s largest tech company, SAP, is worth $350bn – a tenth of Apple’s value and smaller than NVIDIA’s quarterly revenue growth.
It’s not so much relative decline as absolute subordination. The question isn’t why Europe lacks trillion-dollar tech giants. It’s who benefits from keeping it that way.
2. Spies, Lies and Enterprise
The story begins with what economists delicately term “information asymmetry”. Declassified European Parliament investigations show how the NSA’s ECHELON system systematically intercepted European business communications throughout the 1990s and 2000s.
When Thomson-Alcatel bid for a $1.3bn Brazilian surveillance contract, NSA intercepts suddenly emerged alleging bribery. The contract went to Raytheon instead.
When Airbus competed against Boeing for Saudi aircraft orders, US intelligence once again stepped up with conveniently timed corruption allegations. The pattern was pretty consistent. European companies would develop competitive advantages, only to lose out at crucial moments.
ECHELON was small fry compared to Operation Rubicon. For nearly half a century, the CIA owned and operated Crypto AG, a Swiss company that provided encryption equipment to 120 countries.
Europe’s governments, businesses, and banks conducted their most sensitive communications through machines, that had been deliberately compromised by American intelligence. Swiss and German intelligence services knew but traded intelligence sharing for silence.
Former CIA Director James Woolsey confirmed as much in 2000: “Yes, my continental European friends, we have spied on you… I don’t call it industrial espionage if the United States spies on a European corporation to find out if it is bribing its way to contracts in Asia or Latin America that it can’t win honestly.”
This created an “innovation trap”. When competitors can see your research, R&D investments become a foreign subsidy. When negotiations are transparent to one side, how do you win contracts?
European companies learned to license American technology rather than develop their own – a rational response that guaranteed perpetual dependence.
3. The Venture Capital Veto
Intelligence operations and surveillance softened European competitiveness, but capital starvation delivered the knockout. US venture capital investment runs at 1.0% of GDP, Europe’s at just 0.3%.
That threefold gap translates into American startups raising $4.9m on average versus $1.1m for Europeans. By their tenth year, US companies have typically raised twice as much as European counterparts.
Why? European pension funds – with €4 trillion in assets – face regulations that effectively prohibit venture investment. US pension funds allocate 11% of their portfolios to private equity, venture capital, and infrastructure investments.
EU funds allocated just 4.3% in 2022. EU pension funds invest less than 0.01% of their assets in venture capital annually.
This disparity becomes acute at growth stages. America has 14 venture funds capable of writing $500m cheques; Europe has one.
When European companies need capital to scale globally, they face three options: sell to American buyers, relocate to Silicon Valley, or die slowly.
In 2016, Spotify’s Swedish founders wrote an open letter to their government warning that if Sweden didn’t reform housing, taxation, and education, Spotify would relocate. They stayed, but listed in New York.
Still, the message was clear. Even Europe’s winners must constantly weigh the costs of staying put against the benefits of leaving.
Between 2008 and 2021, nearly 30% of European-founded unicorns moved their headquarters. DeepMind, arguably Europe’s most promising AI company, was sold to Google for $400m – pocket change for a company that might have become Europe’s OpenAI.
4. Twenty-Seven Ways to Die
If intelligence surveillance is the poison and capital starvation the disease, regulatory fragmentation delivers the final blow.
The European Single Market – that great achievement of integration – is a fiction for technology. A French startup expanding to Germany faces different tax codes, labour laws, data regulations, and payment systems.
Expanding across all 27 members requires 27 legal teams, regulatory filings, and operational adjustments.
Within Europe, the IMF estimates that trade costs are equivalent to a 44% tariff for manufacturing and as high as 110% for services. Between US states it’s more like 15%.
An American startup accesses 330 million consumers with one product, one legal framework, and one language. A European startup must choose: remain small or spend capital on lawyers instead of engineers.
GDPR compliance costs range from $20,500 for small startups to $70m for large enterprises, with 88% of global companies spending over $1m annually on GDPR compliance alone.
The Digital Markets Act, ostensibly targeting American tech giants, creates compliance burdens that European startups can’t afford.
The result? Regulations meant to constrain American dominance instead entrench it by raising barriers only large companies can cross.
5. Social Democracy’s Success Trap
Europe’s social democratic success also creates its own trap. A senior software engineer in Munich might earn €80,000–€90,000 annually with six weeks’ holiday, strong labour protections, health and welfare protection.
The same role in Silicon Valley has fewer benefits but pays $140,000–$170,000 base, with total compensation at top tech companies hitting $300,000–$400,000 including stock options.
Even accounting for living costs, Europe loses. Munich may be a Mecca for risk-averse individuals seeking stability, but for anyone willing to bet on equity upside, Silicon Valley compensation can fund a European retirement in five years.
The trap extends to business failure. In Silicon Valley, failure proves you’ve learned expensive lessons. In Germany, bankruptcy discharge has dropped from six years to three but with stringent conditions attached throughout.
Stock options – the golden handcuffs of Silicon Valley – remain problematic in Europe. German employees traditionally faced taxation when they exercised stock options, not when they received the proceeds.
Recent reforms have introduced tax deferrals for qualifying startups, allowing taxation to be postponed up to 15 years, but these changes apply only to small companies meeting very specific criteria.
For most employees, receiving €100,000 in options still means immediate taxes on paper gains that may never materialise. The primary incentive mechanism of technology companies remains partially neutralised by tax codes designed for industrial employment.
6. Learning to Love Failure
Some argue Europe’s “failure” is actually success by different metrics. Europe, they say, has chosen universal healthcare over unicorn creation, worker protection over wealth concentration, and privacy over profit.
The average European tech worker enjoys better work-life balance, stronger social safety nets, and greater job security than their American counterparts.
The trillion-dollar question can be reframed: is building such companies even desirable? Apple’s $3.7 trillion market cap exceeds France’s GDP. Such concentration of power in unelected corporate hands would horrify European sensibilities.
When French regulators fined Apple €1.1bn for anti-competitive practices, they weren’t stifling innovation – they were asserting democratic control over corporate power.
It may be reassuring in Brussels, but this self-serving narrative ignores the consequences of cyber-subordination.
Europe’s 7% share of global tech market capitalisation means European governments, businesses, and citizens depend on American platforms for communication, Chinese hardware for connectivity, and Asian manufacturers for devices.
Digital sovereignty becomes meaningless when every keystroke passes through foreign servers.
7. Programma for Tomorrow
Today’s AI revolution offers a swiftly closing window to break established patterns. European companies hold advantages in industrial AI, privacy-preserving technology, and climate tech – areas where regulatory leadership creates competitive moats rather than barriers. ASML’s monopoly on extreme ultraviolet lithography shows European companies can dominate tech niches.
But success requires acknowledging uncomfortable truths. Europe wasn’t just unlucky or unfocused – it was systematically disadvantaged. Breaking free demands more than policy tweaks.
It requires reimagining how fragmented democracies can compete with America’s surveillance oligarchy and China’s industrial authoritarianism.
Research indicates 16% of AI startup founders would consider stopping development or relocating outside the EU due to regulation. High-risk AI systems face particular regulatory challenges.
The path forward is not to replicate Silicon Valley – it’s creating something new. Europe must leverage its advantages: regulatory leadership that makes European companies trusted globally, industrial heritage that understands physical products, and climate commitments that align with humanity’s greatest challenge.
But it must also address fundamental weaknesses: pension funds that can’t invest in innovation, regulations that punish scaling, and cultures that stigmatise failure.
The trillion-dollar trap was constructed over decades. Escaping it requires equal sophistication. The alternative – permanent digital colonisation – is far worse than any compromise with capitalism.
The Olivetti Programma 101 proved Europeans could create the future. Whether they can own it remains uncertain. But one thing is clear: the comfortable narrative of European failure serves those who benefit from European weakness.
It’s time for a different story – one that acknowledges the game was rigged whilst refusing to accept defeat.
That’s a trillion-dollar idea worth pursuing.
Thanks for reading!
Best
Adrian
