Posted on 02/Apr/2015
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 If we want the European digital sector to thrive we should focus more on promoting a cultural change than on regulatory intervention, argues MEP Kaja Kallas.

 

Kallas

What should be the right regulatory conditions to help the European digital companies emerge and become global leaders?

I feel that very often less is more. If we think about all the possibilities we have today and all the new business models that have emerged, then we should keep in mind that these have been created in a rather innovation-friendly regulatory framework   in that field.  We should therefore be very careful before introducing new regulations.

What we should however promoting is a change in the way we treat failure in Europe – not through regulation but through   cultural change- failure is not a bad thing, it shows that at least you tried. If more people are not afraid to fail, then more people will be encouraged to start something new.

The growth of the app economy is certainly creating jobs. However, in the eyes of its critics it may, by disrupting traditional business models, be also destroying jobs. How would you respond to these concerns?

Daron Acemoglu and James Robinson have written a very good book called “Why nations fail?” In that book they show through different historical examples   how people have always tried to protect the traditional sectors whereas in order to be successful you should embrace creative destruction.

It means that yes, old jobs will disappear, but new jobs will emerge. You can fight against the knitting machine but if it has already been invented, it will come sooner or later and the craftsmen will have to find new jobs.

 

How the European Union should address the “threats” the app economy poses on trust and security?

Trust and security are important pillars of the internet economy; service providers have understood this as trust is at the heart of their business model which means that the market already regulates this to some extent. However, from the policy makers side we have to ensure that the right framework is in place for people to trust service providers with their data.

This means that it must be clear that the person is owner of his or her own data and he/ she can decide who can access and use this data.

In November you voiced skepticism about the European Parliament’s resolution requiring the unbundling of search engines. Why going down this way is a bad idea?

I think the debate was on wrong grounds – it was about one company in particular. My statement was that it is wrong for the parliament to start intervening in the investigation procedures that the Commission is already conducting.

The Commission has the right to demand unbundling if it finds that the search engine is an essential facility and abuses its dominant position.

The Commission has the tools to deal with this and the Parliament should not make it political.

 

How do you see the debate about the so-called principle of “platform neutrality”?

It is a very wide question. In general it seems to me that there is a push from some stakeholders to shift the discussion from net neutrality to platform neutrality that would only be applicable to one US Company. I do not think this is right as we might end up harming our European companies even more.

There are many layers to this discussion. First, the use of one platform does not necessarily preclude the use of another similar platform. If one is more user-friendly than the other one, people will change from one to another, as the switching costs are often quite low.

In addition, due to low barriers to entry and the limited cost of creating internet platforms, new ones can emerge   quickly.

On the other hand, some platforms might have network effects that can make market entry more difficult for the newcomers.

Thirdly, many of the business models of internet platforms are built on unneutrality.

 

 photo credits: Johan Larsson

  • Kira Van den Ende

    As an entrepreneur, I disagree with the point of regulation vs. cultural change made in this article.

    Reason I – The European fear of failure doesn’t appear out of thin air. There is good reason to be afraid: going bankrupt in many European countries implies a difficult struggle with banks, bailifs and justice.

    Regulations most certainly play an important role in mitigating this process.

    Reason II – Bankruptcy rate & start-up failure in some countries is very high. Having more start-ups in general will surely increase the number of successful start-ups, but it will also increase the number of failures. Behind each of those failures there are people who were financially and emotionally invested in their project.

    If the plan is to generate more success by pushing the number of entrepreneurs in general, then make sure you provide a ‘hospital’ for the many failures you are pushing alongside.

    Reason III – It might be possible to lower the number of failures in entrepreneurship by obligating entrepreneurs (or at least one person in a start-up team) to have thorough knowledge on how finances and regulations work in the country they operate in. This is not a certainty, but it’s an interesting project to try. Reduce the fear of failure by reducing the number of failures.

    Reason IV – Regulations on how bigger companies behave can help start-ups sell their products & services and succeed. Imagine a law that obligates large companies receiving European money to have a minimum of 10% small or micro-entreprises amongst their suppliers.

    For anyone interested in the topic of start-ups, failure and how these are represented I recommend you read this article on failure porn: http://www.washingtonpost.com/opinions/failure-porn-theres-too-much-celebration-of-failure-and-too-little-fear/2014/12/04/6bc15816-73ec-11e4-a5b2-e1217af6b33d_story.html and watch this video on reconsidering start-ups: https://www.youtube.com/watch?v=4Wb0CGGhjE4

    If you would like to know what professional failure looks like, and be a part of breaking the stigma, I cordially invite you to come to FuckUp Nights Brussels: https://www.facebook.com/funbxl.

    • EvS

      As an entrepreneur and technologist, I am very pleased to see a focus on culture rather than regulation.

      My response to the listed reasons;

      Reason I : Learning to mitigate risk is an important part of entrepreneurship. If an entrepreneur goes bankrupt I would suggest that is a training issue not regulatory issue.

      Reason II: Cultural training that improves the likelihood of success for start-ups should be the priority. That is not a regulatory issue.

      Reason III: I disagree with your premise that deciding factor for success of a start-up is finance and regulation. I would argue that ensuring the company generates value for the client is more important because finance and regulation expertise can be hired.

      Reason IV: I personally would not want that regulation because it just promotes another in group

      Please note. I do not disagree with the embedded video or the problems with venture capital. But I argue it is a knowledge gap that should be dealt with culturally, rather than attempting to regulate.

      • Kira Van den Ende

        Hi, thanks for you reaction. I’m trying to understand why are views are different, and I suspect it is because you feel that dealing with something culturally cannot be done through regulations, whereas I believe that regulations can be a good support and start for cultural change. Is that correct?

        About reason III: I would like to clarify that I did not state that the deciding factor of success of a start-up is finance and regulation. My statement was that knowledge of finance and regulation are necessary. Yes, this can be hired. I was suggesting that it would be interesting to see what happens when you obligate entrepreneurs to either have or hire that knowledge. The reason I suggest this is because research has been done on the reasons of bankruptcy and poverty amongst entrepreneurs here (in Belgium), and one of the findings was that many entrepreneurs don’t know the finances nor regulations very well and operate for years while living under the poverty line and eventually declare bankruptcy, having many debts to deal with.
        Currently, all it takes to open a small business in Belgium is a university degree of whichever topic. Maybe this issue could be shut down by obligating aspiring entrepreneurs to have or hire a certain standard of knowledge and know-how.

        Reason iV: what does ‘promoting another in group’ mean?

        • EvS

          Much of my perspective is based on the need for entrepreneurs to be responsive and agile. To succeed we need to move quickly, and take responsibility for our actions. It has been my experience that regulations tend to be rigid and remove responsibility from the individual to a “responsible authority”. I view this as counterproductive as it removes responsibility and responsiveness from the entrepreneur. Perhaps it is philosophical, but for me while regulations are necessary and may be used to force change it is better to promote an environment where change is instead desired (rather than enforced) enabling a more dynamic response.

          About reason III: I am in Canada and anyone can choose to open a small business and I recognize a number of people are not suited for the task. Once of the propositions I have suggested is entrepreneurial certifications with access to funding (or preferably early clients) once the certification is completed. I see that less as regulation and more as a learning and risk mitigation culture.

          About Reason IV: I think peoples tendency towards preferring homogenous groups will cause this to be counterproductive. Raising the value of the economic benefit and lowering transaction costs would be much more valuable.

          • Kira Van den Ende

            I can see your point(s). Out of curiousity, may I ask what your business is?

          • EvS

            I started in Information Technology in the 80’s and now branching out into Distributed Generation/Energy Storage and Unmanned Aircraft Systems. What about yourself?

          • Kira Van den Ende

            Social innovation – antiheroes.org

          • EvS

            Interesting. I would have considered your approach as learning/cultural and suggest what you’re doing with antiheroes.org would be inhibited if done by regulation.