Someone innovates, someone regulates

I heard some time ago, the quote:

USA innovates, China scales and Europe regulates …

and it struck me, because in some ways it is true, but on other it is a simplification of reality.

USA innovates

It is profound that a large chunk of innovation happens in the USA. For example, on GenAI, the game is played there. In Europe, we have Mistral for example, which provides great models, but it is profound that in the long run, they will lose.

Every model iteration, announced by the OpenAI, Meta and Google are big news. Not the same story goes for other companies though. Ok, there is a lot of respect of work that is being done, but deep inside everyone consider them “alternatives”, if there was enough credits to be spent, everyone would use the above three models.

The money that are spent by those companies to create these models are insane, imagine that recently Zuck told Jensen that right now Meta has 100K Nvidia GPUs, worth approx. 10bln US dollars. And they do not work on their own. These GPUs need data centers, people to run them, engineering teams and scientist trying stuff and they age rapidly. In 1–2 years they will need to be replaced by new GPUs. It is a money-intensive industry that no-one can compete from his garage, just because he/she is brilliant.

GenAI is only one field, SpaceX, Tesla, Starlink (planetary-wide inmpact!), Oracle, Apple, Microsoft … you name it. USA is king, in terms of modern information age software and infrastructure.

China scales

China is great on understanding how things work and copy them. For quite some time now they act as the factory-country for all major tech players, they still are. As long as the USA companies enforce their standards everything is fine. When they try to do things on their own, the results suffer in terms of quality.

It is not true that the products do not function. But, it is a sad reality that the quality is poor. I have seen all kinds of products from Chinese companies, they all have the same problem. Poor quality. They are slow (most of them), clunky, materials are meant to create a durable product. Everything is not optimised to create the best product, it is optimised to provide the cheapest product. It is not a matter of skill, or intelligence. It is cultural.

So, China scales, they provide million of units for every product category you can imagine, but 90% (or more) of them, are just rubbish.

It is like they have huge factories that need to be all-the-time operational and produce stuff that no-one wants, but you do not care, just make stuff.

So, China does not scale production, it just creates stuff, unless you have specific standards imposed on them, like Apple, creating the iPhone there. Nothing to say about that.

Europe regulates

Ah, my favorite part of the quote. Since Europe has a few things to offer, in terms of innovation and scaling production. They just try to impose to the world, as the continent with the more mature set of laws and understanding in order to create regulation on those kind of emerging tech.

That began with privacy and GDPR that it put some things in perspective, but in the end, it can be simplified to these statements.

• Consumer give you data, they are not your own, they are divided in personal and sensitive.
• You can use them only, and it is your problem to understand this and make it part of your service, to a specific end, help them achieve their goal in your service.
• It is your duty, to use the best technology to protect their data, and if you get hacked and the regulator find that you are not doing that, you can get a huge fine, as a percentage of your GMV.

So, in a sense, they created a regulation that give the EU the right to impose a fine to the companies, on very unclear terms, since everything is more or less the company’s problem to figure it out.

The same goes with the AI act, now they are somehow make a big deal on apple to use Apple Intelligence on Europe and it probably be at best limited version of the whole thing.

This is not regulation, this is just a set of laws that terrorises companies for the day someone wakes up and by finding a weak spot in a system, will impose a big fine that may, just bankrupt the company. And everything is so vague, like this:

So, you have scales like the above, for somehow to self-assess the risk and create a report, of voluntarily expose the company to the country’s Privacy Authority.

I have to be frank, I like the idea behind it, but we need something better than, it is your problem to do whatever you think to deal with these issues to the best of your ability and if I do not think it is enough, bad luck.

This approach really hinders innovation and makes everyone constantly worrying.

So, in terms of regulation, poor job is being done so far. The users are not really protected, because thoughts are not complete.

Epilogue

It is apparent, that there is no single country that can innovate, scale and regulate at the same time. It needs a huge amount of focus and energy to focus on each area, plus each one requires contradictive set of skills.

So far, USA mostly do their part, they innovate for the world (and themselves), but China and Europe maybe are not doing their part of the work diligently.