“Failure costs lead some European companies to try and avoid having to innovate altogether. For years, the German car industry refused to see that the writing was on the wall for traditional cars powered by an internal combustion engine. In 2013, Martin Winterkorn, then CEO of Volkswagen, dismissed the idea that electric cars could be suitable for long-distance travel. Instead of seeing this as a temporary limitation that would one day be solved by better batteries or more charging infrastructure, the company simply ignored electric vehicles for the next five years.”
Pieter Garicano, Why Europe doesn’t have a Tesla, Works in Progress
A lot is made, in this article, about the cost of innovation in European countries. Having high social security – worker protection from being fired on the spot – is so costly, companies don’t want to invest.
Interesting idea, of course, and it’s reminiscent of the Draghi report, which central point is often summarized as: ‘EU GDP growth slower than US, so EU will be poor soon.’ Most Europeans will still prefer to live in the EU, even if growth is slower for the next 10 years, if it means being able to have better living conditions, and less fallout from having to sustain a billionaire class. GDP is a bad proxy for wellbeing.
Anyway, if social cost is such a hamper on innovation, the author could’ve chosen a better example than the one in the paragraph cited above, about Volkswagen, where apparently the initial resistance against electric had nothing to do with worker rights, but with the CEO not understanding a fundamental aspect of technology (the cost goes down as it matures).
But let’s double-down on the argument:
Europe’s most flexible economies are its most innovative. Denmark and Switzerland have given the continent Novo Nordisk, Roche, Nestlé, and Novartis. The small and few countries that have adopted a flexible model are Europe’s innovation heavyweights.
Nestlé is an interesting example: why would anybody want to copy a company with their track record? Also, if it were true that smaller countries with flexible worker rights models were more innovative, then how come the UK, Germany and France have the most unicorns of European countries? Estonia has the most per capita for interesting but unique reasons.
But the key question of course, one that should put the axe to the entire idea of writing an article like is: given its problematic nature, why would you want a second Tesla?