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Why does the UK and the EU lag behind the US in the “tech industry” ?

So a US friend now working in the UK asked: “Why does the UK and the EU lag behind the US in the ‘tech industry’ ?”.

The largest factor is market size. The EU is fragmented by language into separate markets for talent, ideas, funding and products. The US’s economic size and remoteness have made it a safe haven for money causing currency stability, pricing stability and fewer economic surprises than individual smaller economies. The lack of effective central decision making with the devolved states in the US has caused problems, but causes fewer regulatory shocks, and allows more workarounds for businesses.

The US federal focus on military development has been a significant factor. In the early days of the semiconductor industry 60% of semiconductor sales were to NASA and the remainder were for defense projects at IBM etc. This did cause large amounts of money to be brought into the silicon valley area over many years and that money was later reinvested as the Fairchild and other businesses devolved into the thriving civilian businesses that we know in the valley area today.

The cultural origins of an expanding US territory have led to a relaxed attitude about risk and investment as people were not comparing with stability. This expansion has been able to continue during the mid 20th century as overseas markets pulled in US goods post world war II, and later due to an expansive US foreign policy. That historical trend though is now over so sustaining growth has been a challenge for the last 30 years in the US. This leaves language barriers in Europe as the primary differentiator.

The short answer is that adopting a single European language is the only thing that, in the long run, will give the EU competitive market scale. The political changes and relationships that build a single market for products will follow from that.

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