Digest: Why the Next Silicon Valley Will Be in Europe

Plus, Russia Has a Problem That Putin Can’t Fix.

Welcome to the digest… my breakdown of the things we’re thinking about and talking about in the Global Intelligence world. 

First up this week… the boring reason why the EU is besting the U.S. 

Regulation—it’s probably the most tedious, mind-numbing topic on the planet… the realm of lawyers and lawmakers and sleezy K Street lobbyists. 

But here’s the thing about regulation… 

It’s important, particularly when it comes to new technologies.  

When you have a groundbreaking innovation like, say, the internet, regulation that specifies what is and isn’t acceptable in this new industry gives companies the clarity they need to attract funding and grow.  

Certainty is good for business. 

Until recently, the U.S. was the ultimate rule-setter. Uncle Sam wrote the regulations, and the rest of the world got in line. 

America wrote the rulebook on the internet… on private-sector space exploration… on computer chip manufacturing… on biotechnology development… and too many other fields to mention. 

But now, that’s changing. 

Amid the partisan division cleaving America’s politics, lawmakers seem to spend more time throwing grenades across the aisle than crafting new laws and regulations that ensure the U.S. stays on top. 

This has opened up space to lead… and the European Union has duly stepped into it. 

Recently, the EU worked with the crypto industry to enact the world’s first comprehensive crypto legislation (set to go into force next year). Compare this to what’s happening in the U.S., where the Securities and Exchange Commission is launching regular and unpredictable attacks on crypto companies, while refusing to provide the industry with any regulatory clarity despite its constant pleading. Little wonder, then, why crypto companies are fleeing the U.S. for Europe. 

Then, just this week, the EU took a major step toward becoming the first economy in the world to regulate artificial intelligence. 

On Wednesday, EU lawmakers agreed a draft version of the EU AI Act. It will now be debated by the EU Council and individual member states before becoming law. 

The act aims to promote AI innovation while establishing safeguards around AI systems that pose a high-risk, such as those with the potential to interfere in electoral systems. 

Notably, major AI companies like Microsoft have responded positively to the draft law, and are engaging with the process to improve it. 

Whoever sets the laws around key emerging technologies like crypto and AI will reap the greatest benefits.  

If U.S. lawmakers aren’t careful, the next Silicon Valley will be based in Europe. 

*** 

Next up… Russia’s crippling labor crunch. 

The Russian economy has a big problem: a huge shortage of working-age men. 

Last year, Russia mobilized 300,000 men for its war against Ukraine. Meanwhile, hundreds of thousands of young professionals fled Russia, many over concerns about the invasion. 

Russia is now short of all kinds of workers, from welders and factory-line staffers to engineers and programmers. According to consultancy FinExpertiza, last year the number of workers under the age of 35 fell by 1.3 million to its lowest level since the early 1990s. 

These departures have exacerbated a problem plaguing Russia for some time. Even before the war, many young professionals left the country, seeking higher wages and freer lifestyles in the West.  

In part because of this, Russia has long had low fertility rates, an aging population, and high death rates. The United Nations now estimates that Russia’s population could fall by 20% by the end of this century. 

Since the war, Russia has managed to keep its economy relatively stable, even in the face of crippling Western sanctions, by increasing trade with China and selling more oil and gas to the Middle East, India, and elsewhere. 

But the labor shortages mean tougher times could lie ahead.  

As the governor of Russia’s central bank, Elvira Nabiullina, put it, “Such a situation in the labor market is a considerable constraint for a further expansion of output.”  

*** 

Finally this week, get ready for constant ads from Uber. 

This week, Uber revealed that it will soon show full-length video ads across all its app platforms. 

On its main ride-hailing app, video ads will run while users wait for their drivers and during their trips. On Uber Eats, they will run once customers place their orders and keep running until the deliveries arrive. And on its alcohol platform Drizly, they’ll appear in the app search results. The company also plans to show ads on video screens in its vehicles. 

This kind of ad integration is a key part of Silicon Valley’s business model.  

Not content to simply sell us a service, tech companies like Uber also hock user data, such as our travel habits, food purchases, and even precise geographic location, so it can be used in targeted advertising.  

It’s a very profitable strategy. According to Mark Grether, vice president and general manager of Uber Technologies’ advertising division, the company is on track to make $1 billion in ad revenue in 2024. 

Call me cynical, but this kind of business model makes me deeply uncomfortable. It feels like we, as consumers, are getting hit from both sides. We’re paying Uber to use a service, and then Uber is simultaneously turning us into a product by selling our data. 

This is why I look forward to the Web3 world… the next iteration of the internet. In this future, which will be built on crypto’s blockchain technology, you’ll be able to own your own data—just like you own bitcoin in a crypto wallet. And you’ll be able to choose who you want to sell it to… if you want to sell it at all. 

Trust me, it may sound fantastical, but that day is coming. 

That brings us to the end of this week’s digest. Many thanks for being a subscriber. And if you have any feedback or questions, reach out through the contact form on the Global Intelligence website. 

Enjoy the rest of your Sunday.