EP253 - The European Perspective: Capability Without Visibility

Speaker A: Hello and welcome back to the Human Innovation Podcast. This episode is a special episode which is called the European Perspective. And I have three guests with me, Stuart from the us, Stephen from the UK and Annette from the Netherlands. And together what we are going to set out to do is talk about European business perspectives and actual topics that happened in the last seven days. And we do this in a way so that executives that are living and working in Europe can benefit from our perspectives. And what we're going to do is we take six different themes. We talk about technology, we talk about the success story, we talk about transformation and change, then deep dive in one specific industry, we talk about entrepreneurial thinking and then we talk about the fuck up of the week. So let's get started. Welcome Stuart. Welcome Annette, and welcome Stephen. How are you all doing?

Speaker B: Well, thank you. Thanks for having us, Jens.

Speaker C: Absolutely great to be here.

Speaker A: Let's start with the first topic, technology. So a lot of things happen in technology worldwide, but as well a lot of things are happening in technology in Europe. And sometimes we're overwhelmed with the news that are coming from the US because if we talk about AI and technology, there's a lot going on in Silicon Valley where Stuart has grown up. But we focus today on the European market and what's happened in Europe in technology. So this week there happened something in the European AI movement and I think what was super interesting for those that have not heard that, so there was um, a consortium of different companies choosing which was called Europa from the European government that got the goal or that got the funding, it's maybe a better way of saying that to build an open source AI model, artificial intelligence model for Europe. And I think that's super exciting because I'm deeply in AI and a lot of others are in into AI as well. Let's start with Stuart. What is your perspective in the win of the Europa Consortium and building an open source model for Europe?

Speaker D: So first of all, this is a very broad topic that has a lot of facets to it. So let's focus first on the aspect of European ownership, European team sovereignty as it relates to AI. We are already seeing within the startup world of the last 40 years those companies and the sovereignties which they report to have a tremendous influence on business and business activity regardless of where they are in the world. So it makes perfect sense that Europe is looking both on an economic, on an economic level to try and create a carve out of AI for economic value as well as business value, unique and centric to Europe. This also means it's going to have significantly more influence and be influenced by the theses and the mission sets of the different governments as well as that community. So from a spirit perspective of let's get something unique to us where we can affect the weightings, we can encourage a local ecosystem, we can encourage secondary and tertiary effects from this core activity. Makes perfect sense. Word of caution though. The other piece to it is we are used to seeing high speed changes within technology and adoption curves. We have nothing even close to the speed of adoption of AI and the breadth with which this technology is going across different function areas, across different industries, across different processes. So as much as it's important for us to focus on what can we build for Europe, within Europe we are going to be in a constant race just for technology itself innovating. So are we looking to create a solution which puts the brakes on certain things, or are we looking to create a solution which creates a ring fence? Very normal, very strategic mechanisms from the past technology waves that's going to be proven increasingly difficult. So how do we have a flexible approach as opposed to a hard light approach is what I would strongly encourage.

Speaker A: Nette, uh, thoughts on Stuart's points and on the topic.

Speaker C: On the topic I would look at it for more from a strategic point of view and that's actually that um, Europe is lagging behind in uh, dependency, in actually energy, in infrastructure, in digital and innovation. And this is actually Europe making a choice, not just giving out options like the Dragavi report, but actually making a choice. So it's making a shift from just talking regulating to actually doing something. And yes, of course the challenges are enormous, but it's a start. And if you don't start, you will not succeed.

Speaker D: What are you bringing up there? Annette is really important and that is if this is truly a shift from a regulatory approach to an ecosystem development approach, this is going to have lasting benefit. If this is a way to try and actually extend that ring fence to enable that regulatory approach, it will not matter if they're successful. The technology is going to find ways around it.

Speaker B: Steven well, so have a think about this then. Can Europe actually break that U.S. china, AI duopoly? Um, they're betting the entire bank on a brand new frontier model right now. And it's a bold move. Uh, but open source state sponsored AI historically struggles to match the raw speed of capital of Silicon Valley. And instead of relying on Silicon Valley or Beijing, Europe's now trying to build a sovereign public good model in 24 different languages. I mean it's a huge task and, and actually it's an incredibly bold move. And, and I think it's going to be something that everybody's going to watch very, very closely because who knows, in a few weeks time we could be talking about a few months time talking about this being the up of the week. Who knows. So I think it's, it's bold. Um, I think it's great that Europe is, is putting its best foot forward with this and I'm interested to see where it goes.

Speaker A: Yeah, I agree. I think it's super fascinating to look into it. One, one thing that I'm interested in looking into is do they get the capital that is needed to build another frontier model? Even if it is, let's say European backed up. But do, do we in Europe consolidate the capital that is needed to get to that level? That's one part. Then what I love is open source because I think that's the future where um, we build something that everyone can use and it is uh, most of the time free to use. And I think that's definitely uh, one of the technical aspects that I'm super interested in and then having something that is coming um, out of Europe because right now I'm using all the different models in my AI stack in the company, which is US Models but also ah, open source Chinese uh, model but also open source US models. But what we see right now is still a huge difference when it comes to open source models to models that are frontier right now. And I think there is no frontier open source model that is out there on a European level that companies trust. And I think that's the relating factor. If we talk about big businesses, we have seen what happened um, with um, Antropic taking back um, mutos and as well the. How uh, was it called? I even don't remember the other version. Fable. Yes. So Fable took back the um, uh, they took back Fable. And that means as an organization if you bet on using that model, that's the most capable model. You cannot bet on one AI model at all. And as a company you just need to de risk and you need to build AI systems that enable you to use the AI model that is best for you. And then open source is one of the ways and a European model will help with that as well. Stuart.

Speaker D: So there again this is a uh, broad topic. So going all the way to the top of the stack and that is open source is critical here. To what extent though are the weightings and the tool sets being controlled on the back end? So the good news is By European. By Europe selecting. So I want to highlight again by Europe trying to build its own ecosystem. You have greater control over those weights. To your specific point, with Fable and Mythos, that was actually pressured by the US government because of the effectiveness and speed with which both of those models were able to penetrate a vast number of systems. So there is that risk profile. It's interesting how the timing is going with that because Anthropic is actually asking for regulatory capture as a way to both protect us and protect itself. So pulling it back to it, what's the mission set? Is this purely a way to try and encourage a local ecosystem, which is what I think we need to be focusing on? And then how does it go from there? Open source is vital from an ecosystem perspective, but that in and of itself does not isolate or remove the optionality of other tools. The next piece to it is we are still within this phase looking for one model to rule them all, and there's going to be always that quest. But we are already seeing splits, as you're mentioning Jens, in the different capability stacks of the different models and even within the scaling stacks of the different models. So we're going to be looking, uh, much more of a tapestry approach. And right now, while we're still getting out of the black box and moving into much more of an easy mode of interacting with these different tools, it seems complex and shifting. Within the next three to five years we're going to see a GUI for AI, uh, we're going to see an ability to leverage on the fly, different models and different agents based on the capability stacks they have. So it's excellent that Europe is getting involved now because it can still have a shaping function within local and international markets. But the big question is going to be is it just a way of trying to source capital? Is it a way of trying to engender some form of control function around the discourse and the data sets? And how does that in turn affect the business processes?

Speaker C: Nette, Might it also be that it actually.

Speaker B: Sorry, no, no, no, go ahead, go ahead.

Speaker C: From my perspective, might it actually be that it's also trying to build some leeway to have different discussions amongst the, in the geopolitical, uh, arena? Because if you have nothing to fall back on, um, what are you going to say? And even if you have something that is maybe less good to fall back on, it gives you a different position. Uh, also there and so far from Europe, we've been very much about regulation, very much about democratic, uh, systems, very much about um, um, an Open an open economy, you know, worldwide and things are closing down. And to change the position from where we are coming in those discussions, it requires also different actions within our own um, region.

Speaker D: One of the things that's interesting and forgive me Steve, one of the things that you're highlighting here that's interesting and a theme throughout all of these conversations and topics is is that the recency bias of the last 60 years, the way we've worked, the way we've navigated the economy is shifting. In my opinion we are slipping back to the norm. And the norm is where you have protectorates within economic systems. You have protectorates just as you have within cartels of industry. We've gone from an extremely open, extremely free flowing capital and goods model and we're now actually starting to see these barriers and they're not one off barriers, they're not just positions between two trading partners. These are becoming structural in that nature. And so getting involved with AI is a macrocosm and a macrocosm of that larger trend.

Speaker C: I agree.

Speaker B: Well, I was going to say, do you not feel that anthropic being forced by the US government to pull its uh, AI models um, out just as Europe's about to um, act on a set of enforcement compliance? I think it's early August that comes into effect. Are we not looking at digital warfare by any other name? Uh, Washington's showing that its advanced AI is becoming a strategic national security asset and that they will cut off Europe and possibly the rest of the world if they feel that those regulations cross the line. I'm quite worried about that. I know, listen, the, the White House is going to change in a couple of years and who knows, that might all change but it, it, it's worrying I think and uh, I, I think we've all got to be looking at this from not just a, a um, European perspective but a global perspective in terms of who's got access and, and, and where that access is being forbidden just because people want to, want to protect their own security.

Speaker D: So if I may, I'll build on what you're saying and challenge some of what you're saying. So historically, uh, going in reverse order and I'm skipping a number of them, Europe uh, had a understandable concern about the power and the effect of Google and the power and the effect of Google's access to data and the effect it was having on the advertising spend and therefore cascading industries. Prior to that we saw a similar fight when it came to Microsoft and, and it became the Microsoft browser And it became the Microsoft apps. So this type of. When you find a power dynamic shift because of a reliance on a technology set, the European model has traditionally been negotiation and regulation and the European model has been let the fire and the fittest. Where I would say there's a shift. Where I'm agreeing with you, Stefan, um, where I would say there's a shift. Google couldn't tell the US government to pound sand. Microsoft was disinterested in telling the government to pound sand. Anthropic already has. And one of the things that's unique about this technology set is that if you have one of these frontier models that is proving to be as expansive and as accelerationist as it is, and then you've got a, uh, group within that company that feels empowered, we're going to be different. The closest we had of this on the positive side was the initial view of Twitter. How do we facilitate more dialogue, how do we facilitate more interactions? And they were willing to go against the regulatory aspects of the US Government to try and make that happen. Anthropic has its own set of values that they're not entirely clear on. And it's easy to poke at Anthropic, but I'll tell you, there's a number of anthropics throughout the AI tech stack and other tech stacks that are going to have similar power dynamics and it's going to be very interesting to see how that evolves over the next two to three years.

Speaker B: Agreed. Agreed.

Speaker C: There from like, uh, enterprise perspective, isn't it like the main, the main lesson for this point in time, you know, be flexible, make sure that you have loose coupling with whatever provider you have and be able to use that surplus, uh, in capacity, uh, to switch when necessary because we are the ball, uh, the cat is playing with. Or to put it like that. Well that's not an English saying, but you get murderous.

Speaker A: Yeah, 100% agree. I think every organization needs to have uh, and not just European, but I think specifically in Europe, because when it comes to technology, at least my experience working in Europe the last 30 years almost, we're late when it comes to technology adoption inside of large organizations, specifically large organization, when it comes to AI and the AI strategies, we need to have that embedded into it to understand where do we put in which AI model and how do we build it so that we can swap it straight away with almost like a mouse click. And I think that's super, super important.

Speaker C: And thank you Jens for pointing that out. And it's not just in AI, it's broader. It's about building in redundancy in your operations, in your supply chains because the world is changing and it's not just AI. We've had Covid, we've had Evergreen getting stuck. Uh, it's a uh, Liberation Day, um, Iran now you know, it's all about creating redundancy and it's going to have an effect also on the bottom line, um, or on the top line. Depends on where you can push your cost to.

Speaker A: Yeah, that, that leads us perfectly to the second theme which is success stories. Conduct 51 million Series A. Conduct is a European organization or company uh, with the headquarter in London so close to Stephen and They got a 51 million Series A and for Europe that's a quite large Series A. The interesting thing, what they do is they built an operating system for AI so they help organizations to structure the data so that I can work with it. Because the challenge that a lot of organization have is, is they have ERP system. They have a lot of different systems and they're built in a way that they're isolated, they don't talk to each other. But even worse. So when you put on an AI, let's say large language model, it cannot read all the data at once. The best thing for an AI model what I've learned is you have one folder and everything in it like a data lake or however that is called professionally. So what they do, they help to structure the data and make, make the organization fit for the future. And that's why I think there's such a hot run and that's why they have such a huge um, for European level at least um, Series A. So I'm super stoked about that because I think this will enable organization similar to what we said with the previous uh, conversation. It will help organization to get AI embedded into the organization faster. Then one topic where we're not going to dive deep into that right now but that's then more how do we behave with that data and how do we utilize the data? Uh, as an organization is a completely different topic. First we need to have the data structured so that it can be used. So huge success story, fun conduct. Really love it to see it. Annette?

Speaker C: Yeah. There's a step before actually structuring the data and that's actually retaining the data.

Speaker A: Yeah.

Speaker C: And it at its most granular level, it's like now the non regret move for every organization is make sure that you have all your data stored. And it seems, it seems like something silly but specifically from a finance Perspective, the number of times that things get actually um, stored at a higher level because of cost reasons, it does make sense. But going forward, not anymore.

Speaker A: Yeah, I agree Stephen.

Speaker B: Listen, these are three guys from ex Planeteer, I think and um, they're battle tested engineers who know data infrastructure and have been quietly thriving obviously here in London. I think the interesting point here is that they've been able to pull the elite tier one global investors SAP iconic index. And while governments are fighting over AI blockades and language models, uh, uh, and practical layers, these guys are being terribly successful and quietly working away bringing in the investment. And I'm really pleased to see that a European based business and I considered England to be part of Europe regardless of Brexit. Before anybody starts throwing a hissy fit, we are part of Europe. There's no getting away from that. The fact that a European country can uh, uh, sorry, European business can pull this kind of investment is heartwarming. And I think that uh, if you're a European business looking for investment, here's a great story and a um, great business that you can point to that here's a good reason to invest in Europe. You know, Silicon Valley's got plenty of people uh, that are happy to always go to Silicon Valley, but start looking over this side of the pond because we've got some really great businesses, some cutting edge technology. I know we're going to get into drones and all of that sort of stuff and tanks in a little bit which is even more exciting. Um, but I think that's something that we should, we should really be celebrating and I'm really interested to see where these guys take this business.

Speaker D: Several key data points here. Let me build off what Stephen, you just talked about. Uh, prior to Covid, uh, Silicon Valley represented as much as 85% of the venture activity globally. Covid was a seismic shift. Covid through its lockdowns created an environment in which it demonstrated successful startups can happen anywhere. And that because of technology and access and things like zoom, after you've done your first deal with a management team that you've never met in person and your first set of board meetings that you don't get on a plane, it start, it shifts from an anomaly to a new baseline. It shifts from a cost of business and a cost of expense to a function around acceleration of investment and supporting portfolio. The next thing is there's a bifurcation that's happening within the investment market. We are still seeing, and we will continue to see large $series A. So these are the first traditionally, the first large amounts of capital going into a startup, into a high risk venture that we're expecting is going to be shifting industry in some meaningful way. AI is benefiting because of its speed and the anticipated impact which is driving large amounts of money being invested in these companies. We have actually seen this model before, not with this size of dollars, but Web 1.0, Early SaaS, Enterprise SAS 2.0. Each time there's been a technology wave in which it's perceived to have a broad based effect on the economy. Very large amounts of dollars tend to chase very small numbers of deals leading to these outsize investments. That is not to say that they're not going to be able to put this to work, but it means that not every Series A, which is traditionally in the 3 to 5 million dollars range, is now a $50 million deal. There is, depending upon the impact that that coming is bringing, is going to have a large and the team that is driving it, it's going to have a large impact on the amount of investment and the pressure of expected returns and the speed of those returns. So let's break this down. We talked about data lakes. This is an important piece that goes into the larger part of AI. I believe that we have crossed the top on the hype cycle and we are about to drop into the trough of disillusionment. Every major technology wave goes through this. Gartner's correct in this regard. And what has happened over the last roughly 30 years is there comes a point when industry says, I've invested a serious amount of time and money and personnel for returns. Show me my returns. And every technology ends up having a point where the show me the money makes them realize investment for investment sake. Whether you are the company who's acquiring the technology or the investor who's backing the technology, it's not living up to the expectations. It's not proving either that efficiency, productivity and therefore profitability, or the shift within the business model leading to increased profitability that's now happening within AI. And part of that, and part of the reason I believe this company received such a large check is as you mentioned, Jens, we have been investing in some industries since the sixties in sensor networks to create data lakes. But data lakes are just that, they're lakes. You need to convert data lakes into actionable intelligence. That actionable intelligence needs to be integrated into the business processes that are in turn driving that efficiency, that product productivity and that profitability that ultimately justifies the investment. What is this company doing? They're solving a critical infrastructure Gap in how do I transition that data lake into actionable intelligence. And so as you look within your technology stack that you're investing in or that technology stack you're investing your resources to leverage, how is this part of that larger process? How is this part, how's that tech stack affecting? I will actually predict right now this is a standalone product. In a short amount of time this will increasingly become a feature. So what are the products beyond the conversion that are going to enable us to extend that product focus and that impact? That's going to be a real telling element. The last piece to it, I started around how Silicon Valley showed that you. I'm uh, sorry. The COVID showed Silicon Valley is a critical place. It's no longer the critical place. And so differentiation, trying to find those elite coders, trying to find those elite startup builders as ah, Stefan is talking about orienting around your target market, if it's Europe, your target market, if it's Central Asia or Southeast Asia or the Americas being co located there to attract that type of talent to go after that type of market. It makes sense. The current model and the old model is go to Silicon Valley, conquer the world from there. This is another example of you can do it from your own backyard.

Speaker A: Yeah, agree. What I love about that story is it's inspiring for other entrepreneurs in Europe. And I think that's still not there yet on if we compare it to Silicon Valley. We have a lot of amazing entrepreneurs in Europe, but nobody knows them. They're not so out there and not so visible. So the trust in these three, uh, gentleman I think is amazing. And I think that's, that should highlight the opportunity for a lot of young founders. The interesting thing, what I've seen because I kind of, I'm connected to the AI uh industry a little bit in Europe and I look into that because I'm just fascinated by it. I know a couple of service companies, they do the same thing. They just don't do the technology version of that. They do the service for organizations to get it and help them doing that from the inside. So what is also quite interesting to see. So if there's one big capital investment in a company like these, there are a lot of companies that will follow and then will support this because to your point Stuart, it's a huge need. Every single organization across the whole world, I bet, at least on um, needs that needs a way especially the legacy organization. If you're not, let's say if you're older than two years, you need something like this to be able to leverage the data that you have. So I think it's amazing that they got the chance to really get going and I hope we will have more this large capital sums in Europe because it builds trust and then the talent flow will come as well. And I think that that will be exciting for a lot of startups and for a lot of entrepreneurs from around the world.

Speaker D: With, with AI engineers starting at half a million dollars to a million dollars, with startup companies being valued often as the quality of the perceived, perceived quality of the engineers as much as technology has a huge impact being able to have access to, to that talent. Hey, come to the valley and be part of the valley. That was the old siren call. Hey, stay close to your friends. Hey, stay close to your family. Hey, be part of this ecosystem that's growing here and be a larger player here. That's attractive. And with so much demand for this critical small number of elites, this is a differentiation point. That's not just. It's excellent that Europe is focusing on this. But we're going to see this in Mina, we're already seeing this in Singapore and Southeast Asia, we're going to see this again in China, we're going to see this in these different places where it's going to be a, hey, how do I defend my backyard and participate in my backyard's elites? And then the next part within each of those geographies, how do I attract the talent from others? It's no longer one way to the valley, it's now where's the best opportunity, lifestyle opportunity and business opportunity. And that's fungible for this small group of people.

Speaker B: Can I just pick up on something you said, Jens, about you know, entrepreneurs? What, what Europe lacks are visible entrepreneurs, right? And, and you know, if one thing that Americans are great at, Stuart, is banging their drum and, and, and promoting themselves and you're the Europeans, we're far more reserved, aren't we? And um, I would, I would challenge entrepreneurs who are watching this now. If you are, you know, pulling in large amounts of funding, if you are creating businesses not just in AI but in, in any business, you should, you should be out there telling the world that you're European, you're building a business, you're attracting investment and the more that you do that, the more you will encourage more entrepreneurs in Europe to do exactly the same. And I think, you know, you're right. 20 years ago it was come to Silicon Valley, right? But now it's, it's come to me. I work, I'm creating this, you could be part of this. In fact, you don't even have to come to me. You can stay exactly where you are, but be part of my journey because of the, the amazing technology we've built over the past 25, 30 years. So I, I just, during the course of these interviews, I'm going to be really passionate about entrepreneurial spirit because, you know, that's, that's been my life. And I, like I said I would challenge any entrepreneur that's out here that's raising capital in Europe. Hey, I think we'd love to hear from you. That's one thing that would be great to promote your story, but you know, be proud about it. Beat the drum, get your name out there and let people know to help other entrepreneurs attract that funding.

Speaker D: So let's directly challenge the business executives and the business leaders that are listening to this and elsewhere. What you're describing, Stephen, is we have to fight the tall poppy syndrome. We need, uh, because if you are a European and you are the type of person who's willing to thrust your chest out and take the risk of being a tall poppy, where are you going? You're going to the Valley because that's celebrated. You're not going to a place where we're building you up to cut you down. So we as executives, we as business leaders actually need to acknowledge there is value in this. And as much as we are uncomfortable, it's leaning into that discomfort that actually can create real value. And the second piece to it is the other side of the same coin. We are still, after 40 plus years of Silicon Valley, after the DAX being formed, after there are a number of large successful startups that have come out of Europe. We are still a risk adverse baseline, especially financially. So there needs to be a willingness. And just as we're gonna fight the tall Poppy syndrome, um, we also need to embrace what do I gain from the failure of this entrepreneur. Now, of course we want to invest in them after that failure, but even if it's an entrepreneur, when they fail, what do they learn and how are we deriving value from that? And it's not so much that we're encouraging failure, it's, we're encouraging the transition, we're encouraging the evolution that comes from those learnings.

Speaker A: Yeah, a key part of that is going back to what Stephen was saying. Not just because that's literally what I'm doing for a living, but you're building trust by communicating. And same to what you said, Stuart, you're building trust even when you're communicating about your Failures. And that's a no go in a European culture perspective in America, um, with the people that I have met over my career, you are explaining that you have felt and you're, you're saying why you have felt and what you have learned in speaking from a German perspective. That's not the way you do things. You try to hide that you failed and you're not sharing anything, um, even not to your loved ones or team members. Like literally you're trying to hide and put everything under the carpet. So that's a shift when you start communicating, utilize and use that as a good example and share that you're failing, but then help other people not to fail. It was the same thing because as more we help each other, as more successful we are. And last point on the trust, especially as a European, you understand the whole GDPR topic inside out because we're talking about this for the last 20 years. Uh, it's native to use like GDPR is native. And I think for this, uh, guys as well, it's native for them. And that builds trust with European organizations that have that need right now. I think that's, that's brilliant. They should leverage that definitely going forward. So let's get us to, to, to the next topic, Transformation and change. So there's a lot of things going on on a political level globally, um, and they are triggering a lot of things. We have seen just, I think it was yesterday or the day before the European team being in the White House and discussing with uh, uh, President Trump and the others around the topics. I will not go too much into politics, but what happened because of that and because of the things that are pushing Europe closer together. There was um, an investment where, where Germany took a 40% stake in KNDS, which is the biggest tank manufacturer in Europe. And what is interesting was that with this, they're allowing this company to go public and that means there's a lot of capital flow into a, ah, tank manufacturing company in Europe. What do we think about that? Stephen, I've heard you have, have a strong opinion on that.

Speaker B: My, my first point is do we need tanks? Uh, I mean there are massive investments in drones. Look at the war in the, in the Ukraine, look at, you know, just. I'm sure somebody's already developed a, a tank that you don't need to be in to, to fire. But yes, I mean it's wonderful that they get a 40% stake in a, in a business that in just a couple of weeks is going to have a, what is it, 20 billion euro IPO. Um, I, I also think that the other thing we've got to consider is, you know, America's, uh, stance on NATO. Ah, and, and, and Hesketh recently just saying, listen, um, you guys better pay up, um, or, you know, we aren't going to have a NATO. And, and, and I understand that and I think it's right that each government should pay for, you know, what it uses and, and how, how it uses it. Um, but going back to your, uh, your original point about kds, um, it's, it's, it's the threat of, of US Troop drawdowns forced Berlin into instantly clearing red tape to scale up European heavy armor production. I mean, that's, you know, that's one of the reasons why they've, they've gone into this. Um, it's, it's really, really downstream, I think, of what the Hesketh deadline is all about. And at the end of the day, listen, war is good business, not just for Europe, but for, for, you know, the rest of the world. And um, industrial defense is rushing to public markets to, for funding. And so again, this is, I think, a topic that's going to come up time and time again during this series. Um, and who knows where the next big investment is going to come from.

Speaker C: Yeah, fully agree with Stephen that uh, it seems investing in the past instead of in the future. And I was very happy to read that the Netherlands actually funded 900 million into the drone line initiative for Ukraine and that Ukraine is actually supporting the US in their efforts in Iran to uh, uh, do modern warfare instead of sending tanks, um, not even looking into the difficulties that we would have within Europe to actually ship those tanks from the left side of Europe to the right side of Europe, uh, because of the different transportation, uh, sizes of our train systems. So it's uh, and I'm by far a defense expert, but uh, it does make me wonder. Yeah.

Speaker A: What's your view on the other side of the pond?

Speaker D: The glove has been thrown down. Here's my chance to take a contrarian view. So let's look at this. There's a number of things that these are, this is a critical harbinger for and I think longer term positive maybe is not an artful language to use here, but I think this is actually a positive outcome for the very reasons that, uh, Annette and Steve have mentioned. First, let's break down. Uh, yes, we're moving into a drone warfare. Let's change that framework. Drones mean you unmanned. What is not going to change is that the battle space is still under the water, on the water, on the land, in the air. It is also increasingly under the land and it's also increasingly in space. What is drones change? It doesn't change any of those realities. It doesn't change the realities of force projection. Drones are saying we can make remote and AI Adding on to it is we can leverage swarm and therefore minimize the amount of human engagement in order to do that power projection. So as long as there is land based activities, there is a need for tanks. Right now we're thinking of tanks as large metal boxes with people in it. You just remove the people and it's just a drone. That's a large metal box that needs to be able to have survivability against other large and small metal boxes that are designed to take it out. Next piece on top of this, why is the 40% take I believe a bit transformational? We are used to and we'll be talking about this in a future story we're used to in particular in Europe, governments looking to merge their activities around defense act defense investment as a way to bond the different economies together for a common outcome. But this is different. I read this as this is a government that's saying I'm going to put in the risk capital until the market catches up. And I'm also by making this deployment identifying this as a strategic asset within my technology stack. So as much as I'm benefiting from this, I am putting my thumb on the scale in a different way. The old model was how do I pump government money into it that it kind of quasi claims to be revenue. How do I pump revenue into this or money into this as a way to try and discourage competitors and increase consolidation by allowing this to ipo. If this works, we're going to see other companies want to try and have build metal boxes or under the ground metal boxes or under the water metal boxes. It creates that ecosystem opportunity and it shifts and changes the way government interacts and and that's the next macro piece to it. I do not like this, but this is reality. We have benefited from recency bias on focusing on technology innovation that improves the consumer technology innovation that in theory improves efficiency. This has actually left a significant amount of material science, a significant amount of base industry and a significant amount of base monetization of base science in the background. And we're now returning to an environment, a multipolar environment in which material science is going to be mission critical. Whether it's affecting the size of those drones, the longevity of those drones, the power Projection which then we can turn into new ways of shipping, uh, product, new ways of creating efficient supply chains. This is enabling us to ease into defense spending is a critical portion of my overall strategic economy as a nation state. So we can beat up on Hegseth, we can beat up on Trump. But what they're doing by allowing folks to throw pins and needles at them, it's changing the conversation within different regions to say I am going to go against you and defend my space. And MySpace is the economy, my space is the nation state, my space is the defense state. And so I'm going to yell at you. But if, uh, just turn back the clock 10 years. If they had made this investment, if Germany had made this investment 10 years ago, how many Germans would be saying to themselves, we are bad Germans, we can't do this. We must connect with the French, we must connect with the Spaniards. We cannot do this alone. But now they can say, evil Trump, he's bad guy. We're going to make a move. And I think this is freeing. I think this is positive for all the nation states within Europe.

Speaker B: Not that I want to get into politics, but isn't that Trump's superpower?

Speaker D: Get everyone pissed at him so they take action. 100 yeah.

Speaker B: Just, just, just keep everybody off balance 100%.

Speaker D: No, I, I think it's, I think it's one step further. It's. I will have everyone be angry at me because it.

Speaker B: Yeah, yeah, yeah, yeah, yeah, yeah. No, yeah, yeah.

Speaker A: Negative attention is still attention.

Speaker B: You can't buy that column inches.

Speaker D: But I, if I'm predictive, you'll notice my language is to be predictive for those of us and hold me accountable. I believe this is a shift in how the European economy is thinking about investment and thinking about industrial development. And I think that's positive.

Speaker B: 100 yeah.

Speaker A: Looking at it from an innovation perspective, uh, I would agree with because what we have seen a, uh, lot of technology development and innovation development came from these times. If we look backwards in the Second World War, a lot of things have been developed that then later on went from let's say war perspective into normal industries. So the know how and the speed. If we, we just take the drone example that Steven mentioned five years ago. We have not talked about drones. Welfare warfare, not welfare warfare. And now they have increased their capability especially over the last year, the last 12 months. Extremely. That's super fast. Innovation cycles. I'm all against wars, but what I love to see is how fast they're testing, how fast they're failing and Iterating and then putting it to the next level. If you just look at what's happening, I mean if, same thing if, if we, if we look at the Middle east, what happened, um, day one the Iranians were sending out drones in over the water and that would not have happened 20 years ago. So the adaptation is way faster. And of course with that the capital investment into a drone, comparing it to a massive tank is also nothing comparable. I've seen figures $5,000 or euros we are in Europe Euros for a drone. Comparing it to a cruise missile or something that cost hundreds of thousands is super innovation from an innovation perspective. So what I like about that is just the speed of innovation linking it to the KNDS investment. What I hope that they take this speed of innovation as well into a company like this is going public. There are a lot of economical reasons for that. But as a European uh, what I would love to see is how do you do that in a way that other companies can benefit from it and the ecosystem in Europe can benefit from it and not just building tanks, but building innovation that can be leveraged to, to move things forward.

Speaker B: The interesting thing about that drone market though Jens is a lot of those manufacturers weren't even defense orientated. They, they were smaller entrepreneurs that obviously you know, saw a, a gap in the market if you like. And, and again I go back to that entrepreneurial spirit across Europe. You know there's, there's taking a, a practical uh, product and then you know, diversifying into all sorts of different, different ways. Amazon can't get a parcel delivered by a drone yet. And yet we can go and drop a bomb somewhere in Iran or, or the Ukraine or Russia. That's an interesting point.

Speaker D: So, so Zelensky has been telling us that uh, modern warfare has fundamentally changed for going on five years now. Um, those folks who pay attention to the change in state and how warfare is being done there, this is, I believe historians, this is not a hard prediction. Historians are going to be talking about the Ukraine, Russia conflict the way they talk about the American Civil War and how much of a harbinger it was for the conflicts of the 20th century. And I believe we are, we are. One of the reasons and that you mentioned Ukraine is helping out is because the conflict with Iran has really shown how much of an asymmetry there is between modern technology and its ability to just simply adroitly uh, just nullify the dominance of a hyperpower. And it has to do with what you're saying, Stephen. We're focusing on fighting the Last war. And while America has innovated very, very well, it's still because of its dominance, been fighting in the space that it always dominated. That is no longer. That is not currently the case. So the last point I'll make to it is why is it these entrepreneurs are the ones who came up to it? Because it wasn't a gap in the market, it was an abandonment of the market. It was an active decision in the Valley. Anything to do with defense tech, literally until roughly three months ago, was Persona non grata. You will not do it. And we're now in a situation in which it's not a good guy, bad guy anymore. It's this is this power projection is real. So you can join either side of that fight, offense or defense, and have a net benefit to humanity. Sitting this one out is no longer an option and therefore it allows. And that's right. The last thing I'll say is what is this IPO showing? It's communicating to the European investment community there is an exit market and that's critical. Investing just for national security stake doesn't make your LPs happy. Investing for national security, that's going to give you an above average multiple into a guaranteed exit. That's interesting and that's what this is showing.

Speaker A: Let's move on. Next topic, entrepreneurial thinking. We already touched the two key topics, uh, connected to that and we started to dive into this. But I would love to double click on uh, one part, the Europa, uh, consortium of the AI open source model. And what was fascinating for me is that it was an Italian firm which I called Domin, however you pronounce that. Yeah, so, so they brought different stakeholders from different European countries together to, to then win this, this uh, prize, which I think is extraordinary. So it's a European um, gathering of different companies that are supporting the same goal, um, super entrepreneurial thinking. Then same with the three leaders that, that came from Palantir. Building the AI enterprise and getting the 51 million. Entrepreneurial thinking in Europe I think has still, like we already mentioned, still to grow and still to, to unleash the opportunities. Because it's always seen as, I don't know, at least what I've experienced is always seen as uh, the dirty world. Like you are a capitalist, you want to earn money and you go into entrepreneurship. I'm working for a large organization. This is all capitalists as well. But I'm just contributing to an organization. And um, I think we have a huge opportunity with entrepreneurship, especially with the rise of AI, uh, happening right now and agentic AI and so on. What are your thoughts on these two stories? And entrepreneurial thinking for organizations, but also inside of startups and entrepreneurs in general. Let's start with Annette. This time.

Speaker C: The entrepreneurial thinking with the ecosystems that are being created for AI, for defense, um, those are all great examples of how we can actually, um, create an atmosphere that it's okay to step out, but it's really about creating a mindset that it's okay to be, indeed, well, be one of the tall puppies, so to say. Instead of, uh, trying to, uh, uh, cut the head off the tall puppies.

Speaker B: Can I just dive in?

Speaker A: Yeah.

Speaker B: So, quick history lesson, right? The word entrepreneur actually comes from the 13th century French verb entrepreneuria, which means. And I didn't get that right, I'm sure, which means to undertake and was actually for people to invest in, in music and um, the arts. And of course, you know, during the 13th century it's used quite a lot and then it tails off and then it starts to rear its ugly head again around the, around the 70s and 80s. And the problem I've got with entrepreneurs is it's a, it's an overused word, right? It, when you don't know what to call yourself, you call yourself an entrepreneur. And, and, and that's. That, that, that's what you're saying. It's almost become like a little bit of a dirty word. You don't, people don't really take you seriously. Serial entrepreneurs. And, and, you know, we, there are many across the world, I mean, carry that and wear that, I think with a, with a badge of respect. But if, if we're to promote entrepreneurship, we've got to, we've got to kind of raise the credibility of what it means. And, and I think that's, that's a big challenge. Um, I'm hopeful about the whole of European entrepreneurs, you know, standing up and like I said earlier and being counted. But we, we just, we just overuse the word so much that it's lost its, it's lost its meaning. I'm sorry.

Speaker D: Week and a half ago, my family, uh, my wife drove to Badsell in Austria outside of Linz, and picked up some, uh, rolls for breakfast for our kids and for us and was very proud to come back and say, hey, this bakery was established in 1280. And right now, throughout this process, um, we're talking about the dynamism of data and digital and the dynamism of AI and the dynamism of taking risks. But Europe has been successful, consistently successful in the analog sphere and it is modified and it has evolved and it has transformed analog systems to create efficiency. So most likely, if you're watching this, you're going, hey, I'm not looking to create the next social media app. I'm not looking to create the next AI frontier model. I'm, I'm involved in a business of humans selling to humans, providing critical resources, transforming critical resources that are either part of a supply chain or the end of a supply chain that's affecting an industry or people. Entrepreneurship is in this regard, I would say what's important about what we're hearing and all of these themes that are, that can be transferred to your business, that you should be thinking about to your business is this is not a call to move away from the value and the stability of the analog business model. It's how are you finding that incremental efficiency that protects and extends your business? How is it you're leveraging technology and leveraging an innovative mindset to look for improvements of efficiency and productivity? Because even as we're gaining tremendous amounts of both from AI, we are going to then benefit from taking those resource savings and at the very top of this conversation, reinvesting those savings into the diversity of how we manage those digital systems, be they AI storage or other tool sets. This is not a freebie. AI is giving you incredible ability to do new things. Part of that is going to be to continue to defend and protect your own business from the very tools that are empowering it. So this is a critical aspect. When we talk about the, uh, tall poppies and we talk about the addressing the risk tolerance or the failure intolerance, it's not all of a sudden I'm going to be a gambler. It's acknowledging a shift in the risk profile and making smart investments and leveraging technology that is still core and beneficial to your base system, that enables you to out compete your competitors, which you have to do now because the one thing we can 100% assure you is if you stand still in five years, you're either in an industry that isn't relevant or you're done. And neither of those are attractive.

Speaker A: Uh, love that. What is quite interesting linking that to organizations in Europe, it's the mindset, like you said, if you are a startup, if you are an entrepreneur, you're basically running every day and testing and figuring out, um, most of the time with the back to the wall, at least in my case, and what you have in large organization. And Stuart, we have been working together in, I think it was 2015 around or 1415 on. On this kind of topics in one of the leading organizations in, in Europe. How do you bring that into the organization so that it's going to happen? And that is linked to behavior and mindset. And that is so critical that organizations internally need to find out how do you shift the mindset and almost the culture of an organization from a uh, protection mechanism to a um, a more let's say invention and testing organism. Because the world is so fast with AI and the technology and it's not all about technology, but it just, it is so fast and the external world is forcing you to change faster. And that means you need to look internally. How do you build the mindset and the teams? Because we as humans we, we don't like to change, but we have to learn to change faster. And as part of that we need to build completely different structures of organizations most probably to be able to keep up with that.

Speaker D: This is not a commercial. We didn't talk about this. But if I may, Jens, I'd like to reference you and Stefan as examples of exactly what you're talking about. And then first and foremost for those leaders who are watching this, as much as this is a call to action for you to change, the truth of the matter here is it's empowering and, and finding the yens and the Stevens within your organization. Find an individual who's demonstrated a willingness to think differently, to communicate and take the risk of communicating differently and empowering them to take action. And that is two sides of the coins we talked about. That's accepting the potential risk and facilitating a change of behavior of your business, a change of processes in your business and then monitoring what they do. If you find someone who's capable, like Jens, who has that ability to understand the core business model or aspects of your core business model and can demonstrate to you in a concise way how to make those shifts or as uh, Steven has to make those shifts. And then you can either you do everything from the easy one is I sandbox this. The problem with sandbox thinking is it feels like you're making a change like a snow globe. You shake a snow globe and, and it's different but you know that at the end it's the same. It's. You need to get out of the sandbox and you need to be. That's where the risk tolerance is. By incorporating and encouraging these two types of people, you're going to end up having either a shift in your core business model that extends its longevity, an additional business Model M that stacks on top of it or around it, that provides new revenue streams or new engagement with your, with your customers as Steven is a prime example of. And in any of uh, in any consistent way you become known as an executive who fosters this. It's going to start to attract like minded people into your organization. You demonstrate in the market you're willing to take these type of risks. Own the time it doesn't work. Own the time that it works in a positive way in that how it benefits your customers, you're going to attract more customers. It really is. The risks are completely outweighed by the benefits here. But that first step is hard and six months in when you're hitting friction, it's easy to box it. It's uh, when you're hitting that friction point, that's when you're actually doubling down on the empowerment. That doesn't mean you have to double down on the financing but you're doubling down on the empowerment to then find those mechanisms. Because my portfolio companies, if they haven't broke something this week, they're behind. If they haven't fixed things from last week, they're behind. And we need to incorporate that. That doesn't mean we're becoming a whole new company. But the more you can incorporate that and empower people within and leverage people from out to facilitate that, it's going to meaningfully benefit you. And you might come and buy some software from some of my companies.

Speaker C: There's an additional aspect to that Stuart. It's not just coming from you need to be more prone to taking risk. It's actually going back to why are you doing this? What is the purpose of the organization? What is the purpose of the people in the organization? What do they create value with and how do they do it? And then to your point of when the friction, there's no shine without friction. But it's not about obliterating those who actually create the friction. It's about converting the naysayers to yea sayers. If you have a need for a change from, you know, a good point where it actually adds to the value of the organization and you then start with the ones that are very forward, very innovative, that's easy. But then the rest of the organization is not going to follow. What you want to actually focus on is those who are opposing it. Not because they are opposing the value creation of the organization, but no because they have good reasons why something wouldn't work and then address those difficulties and take them along. So it's a both end and you need to do that because otherwise you're only going to take the forward, the forward looking, um, people in the organization with you and you need the whole of the organization because you can't build well nowadays. Of course Stephen, you can, you can have an organization with you and another half person but, but still, generally speaking there's more people there.

Speaker B: I just want to sum up one point that while you were talking, Stuart, this came into my head and it is that you've got to get comfortable with being uncomfortable and you've got to find people that are ah, prepared to get uncomfortable in that journey because otherwise, like you say, it's easy to sandbox test. And um, oh yeah, we're innovating, we're sandbox testing. That's complete crap. Because if you're not taking that sandbox and implementing it, you're just testing it means nothing. Right. So you got to get, you got to get comfortable with being uncomfortable. We've got to find people that are happy being uncomfortable on the journey and then you will propel yourself forward 100% as a leader.

Speaker C: Be able to contain the discomfort within the organization.

Speaker A: Yeah, agree.

Speaker C: Otherwise it's going to break down.

Speaker B: Absolutely, absolutely.

Speaker D: One of the things. And Annette, I need to get to know you better to have some examples. But what I can say from Jens and Steven, uh, is that your ability to concisely determine here's where we want to go. It doesn't mean you're defining the end state, it doesn't mean you're describing the pathway of where we are now to what that end state is. But instead you're making it a positive change challenge. Here's where we are, this is the state where we need to be. You as leader are communicating. This is the change in the market, this is the change in the business processes, this is a change in the economic realities that are happening. We need to navigate these. And then you challenge your organization to say, how should we tackle this? What are some ways that we can turn? My favorite thing is it's a Silicon Valley. But it makes a difference. It really makes a difference. How do we turn our weaknesses into strengths? How do we acknowledge those weaknesses? Uh, because they may actually be identifying areas of attack, areas of challenge, areas of evolution that in turn open up new things. And instead of how do I mitigate my weakness, it's how do I acknowledge that and expand on that is just one facet to consider here. But the key thing I want to leave us with is our job is to say this is the direction and the end point, not the description but the endpoint I want us to achieve. Here's the lay of the land that we're going to have in that process. And then challenge your team to navigate and build out what those things are. And you're going to be surprised.

Speaker A: Let's get us to the last topic of the European Perspective version of today, the weekly fuck up. There was a fascinating fuck up. Um, The Franco German 6th generation FCAS fighter program was killed because Airbus and Dassault couldn't agree who is leading the whole thing. I leave it as that. Who wants to jump in first?

Speaker C: I actually live uh, uh, nearby a uh, facility of the ESA which is a pan European space uh, agency. And little um, that I know of the organization but what I do know is they have everything written out, very tight procedures and everything on a gold scale to make sure that it's done equally uh, with all the partners and they are a very great success. So it's not that it's not possible but it's been created from the get going to actually achieve that. Um, and at the same time they have this in all their communications. You read about them and hear about them reaching out to other types of organizations and learning. So there's this very structured way of doing what they do and at the same time being very open. So I thought that was a good um, ah, junk supposing towards the uh, Franco German uh, fuck um up. Stephen to you.

Speaker B: Here's what's interesting, that the French and the German can agree on tanks but they can't agree on jets. Uh, I mean it is almost like and this is classic Europe, right? This is, the house is on fire, the neighbors are screaming and the two main architects are arguing who built the best um, fire escape.

Speaker C: Right?

Speaker B: I mean it doesn't come as any surprise. This is, this is classic um, this is classic politics in business. And egos overtook this project which would have probably been a resounding success. Um, but yeah, the irony I think is we can agree on tanks but we can't agree on jet fighters.

Speaker D: So I wish I was the person who came up with fuck up nights but we are heavily, I love them because, and I'll start by prefacing my own fuck up. Uh, I had three opportunities to convince my firm to invest in SpaceX when it was at $112 billion, when it was at $250 billion. And it was at that time raging between 350 and 400. And I failed miserably every single time. They just IPO'd at 1.3 got up to 1 7. And we can talk about the fact that they've retracted, but that's standard first year activity of a stock after its ipo. And no matter how you look at it, that would have been at the first time an easy near 10x, which is the whole purpose of what you're looking for within a fight within the venture community and being able to do that on the secondary market at those type of price points, that's meaningful. So the reason that's a F up for me is because I did a very poor job clearly in communicating the value proposition in a believable way. But the reason why I couldn't convince them is the assumption is if you're at $112 billion, there's not enough upside to really to handle the risk. So let's talk about what that means with this activity. We are again, as we mentioned earlier, we're talking about fighter jets trying to figure out who's going to build a better escape hatch. But the truth is we may not be needing new escape ladders. We need a different tool set in order to uh, adjust and move for what's coming. SpaceX, when it was $112 million, its claim to fame is it stopped blowing up on the launch pad. Now we know and see how easy it is that to be able to make the decision to get involved in SpaceX. So while this is an F up and I agree with everyone saying in how it came about, I predict like so many F ups, this is going to end up being one of those. I'm glad we didn't do that because it would have trapped us in the old thinking, it would have trapped us in the old internal communication model. It would have forced us to create jobs because jobs are a big part of this. To create tool sets that create a sense of community connection between different economies to help us make us safer when we're now in environment. As both of you have stated, we need technology footprint, we need new product types, we need innovation to be able to force project and protect ourselves against force projection. So what I hope comes out of this failure is that we see a shift away from the old models that were fighting fifth generation last war. And we're learning from Neanderthals, we're learning from these other companies who are building augmenting tools, augmenting power projection as opposed to just the base platform that has a human in a seat. This is, there's a lot built into that. There's a much longer conversation around this But I think I predict that if we see a successful reshaping and reorientation of of those funds towards these other smaller form factor, smaller run, more willing to take risk businesses across the European landscape that is going to create a number of really successful companies. And I hope that transitions not just in the defense space but into other areas of well areas as well. Perhaps air conditioning.

Speaker C: Stuart, this comment does beg me for a follow up conversation with you on um, the metal boxes on the ground because now I'm getting confused but we'll save that for next time.

Speaker B: So here's the other thing that this, this, all of this has come about just as like the European defense collaboration now becomes an essential for survival. So I, I think you're right maybe that that investment might now look for those, those drone providers or, or people that are innovating in, in other industries that can, can have a defense uh, a defensive um route in. So um, I'm only pleased Jens that you didn't raise Keir Starmer resigning as the fuck up of the week. So yeah and when we have that

Speaker D: conversation the number of cost loops within boxes on the ground compared to the number of cost loops within avionics is so it is exponentially different. So the money flows between the two. Oh, you want to build some boxes we all think are silly. Hey go have your 40 billion. You want to create a whole new uh weapons system and all the associated weapon systems with an AV objects platform. We are talking, it is exponential orders of magnitude delta between them. So there's a lot more pride and a lot more ego within those conversations. And in that regard the F up here was hey guys, this was your last gasp to get a free, a free uh, draw from the trough. And now we're going to have to find other alternative uses of this capital.

Speaker A: What I'm curious about, what can organizations learn from this? Because I mean most M of us have worked with organizations that are across different European countries and all of them have smaller versions of this. But if we take a UH 6th generation fighter jet program they are collaborations there, there, there's knowledge, there's intelligence built out over, over this development over the last years that can be leveraged. So I think it's uh, if I would be leadership of an organization like this I would look into so what can we leverage and spin out from what we have learned and then use that to take something else to a different level similar like Stuart, I mean you're the master of that. Like a startup would figure out how do we need to turn around what are the things that we need to do and then you build something completely different that is not a fighter jet, but it's still leveraging the intelligence and the know how and the relationships that you have built out. So I hope we are going to hear and see something like, like this from the people that, that have been involved. But yeah, from, from, from a high level perspective, what, what was public at least until and until we recorded this, we cannot see that. Um, and I, I just hope that organizations look at that and leaders of organizations and then say what can we learn from this so that the things are not happening and how can we build an intelligence like capturing so that things are moving and the relationships with that. So with that, let's, let's get it to an end. Thank you very much everyone for getting, getting on the call or getting on the first European Perspective. If you are a listener, if you are watching this and you have questions, topics that we should discuss, or you want to join us for a specific episode, you're welcome to reach out to any of us. We're happy to talk to you and we would love to answer your question. Thank you very much everyone and see you next week.