Judith Dada, General Partner, Visionaries Club: How Europe can stay competitive in the age of AI

0:00Judith Dada:Hello and welcome back to the Scaling Europe show. I'm Seb Johnson. Today I'm joined by Judith Dada, amazing investor in Europe, but crucially, I'm all be here today to talk about AI. You've become a leading voice for AI in Europe. You have now written this amazing short story, document, piece of research along with some of the leading AI minds in Europe. It's called Europe 2031. It is a look at the next five years of AI in Europe. What's it about? Can you give us the central thesis about what you've written and why? So in a group of people who deeply care about this continent, we came together and we asked the question, why does it still feel like Europe is asleep at the wheel when it comes to understanding the magnitude of this transformation, the speed at which it's happening, and how transformative it's going to be in terms of the future that we all care about so deeply.

0:48And because it's a somewhat complex topic, it's a multifaceted topic, it's a multivariate problem it touches on, policy it touches on, the economy it touches on, social cohesion, social welfare systems. We said, you know, let's actually write a scenario, let's base it in facts, let's look at the last two years of what has happened and then let's take plausible assumptions of how things are going to develop in the future. They need to be logically internally consistent and let's basically write a narrative scenario, make it really gripping, make it such that people can connect to it emotionally and really write this out.

1:22And so we basically fast forward kind of into the future, into the next five years. We go in to quite some detail about the troubles that Europe is going to get in and kind of the wrong assumptions that it takes, the wrong turns that it takes, the ways in which it still tries to correct course. But the TLDR is that we believe that the current moment calls for the most drastic and biggest political agenda that we've ever attempted in peacetimes. Right now, politicians and the broader public are perceiving AI as one issue among many. We've got many problems that we're facing in Europe right now.

1:57This is an unprecedented time, you know, to be a human on this planet. You know, there's, we call it the poly crisis. There's obviously the war in Ukraine. There's a war in Iran. We've got a stagnating economy and we've got demographic change. And so AI is just perceived as one of those issues. The key message that we want to send with this piece is that AI will be the issue and the topic and the opportunity to supersede everything else. Because there is no way for Europe to, for example, win a defense in 10, 20 years from now without also winning an AI. There is no way for Europe to protect its social welfare system without winning an AI.

2:31And so what we believe is that the world was given AI as a gift. We need to take it very seriously. There's also adverse consequences that AI can have. And we believe that any world with AI will be a better world with a strong Europe in it, a Europe that can stand up for its values, human dignity, freedom, equality. But to do that, we need to really harshly and drastically look at the facts and figure out what the hard trade-offs are in terms of still getting ahead in a race that, by and large, we're not winning right now. And that's what the piece is about.

3:05Judith Dada:And so it's a story, really, but a very plausible reality that could happen in the next five years. And it's pretty bleak, right? Without too many spoilers, it's not looking good for Europe and where we could end up in 2031, almost as like a secondary power, pretty much dominated by the global superpowers who win in AI. What's interesting is that it's based on the steps and actions that have got us here today. So when you look back at the last couple of years, what has happened? What have we got wrong that has made us need to do this big course correction? Where have we gone wrong to get us to where we are today?

3:38Yeah. So there's a couple of things that we go into in the narrative scenario. The first is that we underestimated the magnitude of this transformation. We kind of saw AI as, you know, just another technology shift, maybe in the way that mobile was a technology shift, without understanding that it's much more similar to the Industrial Revolution, if not actually bigger than the Industrial Revolution, because we're talking a technology that is so horizontal that it can basically affect every single industry. It's kind of a, you can think about it like a wave that, you know, in the beginning it starts to build, but in the end it doesn't leave any piece of ground untouched and, you know, kind of not wet.

4:16Everything in the end is covered by the water. That's how we think about AI. First piece, we underestimate the magnitude. Second piece, we underestimated the speed. We kind of, you know, in this scenario we say people thought we had years, maybe decades, you know, kind of to still position vis-a-vis this technological trend. I think there's two things that we need to differentiate. On the one hand, there is an exponential development of AI, and it very much is exponential. And then there's a slower diffusion of AI through society. And both things can be true at the same time. And it is true that the diffusion takes longer.

4:44But actually, when it comes to the exponential speed at which the raw frontier capabilities are developing, we are underestimating how quickly that will wash over us. And the third thing is that we have decided to ignore a couple of the most important messengers that were actually speaking the truth about what this would mean. And those messengers tend to be located in Silicon Valley. They tend to be, you know, somewhat associated with, let's call it MAGA, kind of the current, you know, political administration in the US. And there is a deep skepticism that we have in Europe when it comes to these people.

5:18Now, when it comes to the political belief, you know, I think a lot of authors absolutely share the criticism that, you know, the European public has towards these messengers or these companies. But at the same time, they have just been consistently right about AI. You can think about Elon Musk, what you want. I have a lot of criticism for him, for everything that, you know, kind of stands for his political views and so on and so forth. But he has been consistently right on AI. And so we've kind of mixed those two things into one where it's kind of now a world, you know, where if they say A, then B must be true.

5:49That's not actually the case. You know, we can criticize them in one dimension and they can still be very right in the other dimension. And so, you know, we believe that it's really, really important to take the right facts and the right signals seriously. And then there's a last aspect, which is standing up for what it would mean to now engage in the kind of political and economic undertaking to get ahead, to truly get ahead in AI in Europe is not something that people think is politically favorable. It's not something that people or that politicians feel they would get a lot of applause for.

6:25Politicians feel like, you know, I'm already kind of, you know, fighting issue after issue after issue. And so what we see the public and leaders are struggling with is they don't really manage to find the type of language, narrative, positive story of how AI can go well. They're asking people to work harder, to engage in the kinds of data center build-outs and frontier capability build-outs that are required without concretely being able to tell people how this benefits their lives, how it doesn't just benefit the lives of a small kind of tech elite and tech bubble. And so we think that more leaders need to be willing to spend the political capital by developing these very positive visions of how AI can go well.

7:09And only then will we be able to actually kind of take the public on board with us because we believe in a world where AI benefits all the people, not just very small elites. And so that's what the piece kind of goes into detail in.

7:21Judith Dada:And you talk about political leaders. Is that who you're targeting with this key message? Are those the people that you really want to wake up to the reality that Europe is in? Yeah. So there's a couple of audiences that we had in mind when we were writing this piece. We had a lot of discussions about who's our ideal reader. And the ideal reader at the end of the day, you know, comes down to someone who, you know, is, who cares about the fate of the European continent and who has some semblance of like a stake and, you know, kind of agency over making or helping it go well. You know, that on the one hand, of course, are political leaders and they are, you know, I would say probably the most important stakeholder group that we're trying to address here, but it's equally business leaders.

7:59It's leaders of civil society. I mean, there's a lot of people who will be affected by this transformation who will see hopefully amazing benefits, but who by and large will need to understand and grapple with the change that is about to happen in this world. And so our kind of ideal reader was quite a lot broader than, you know, just a narrow elite in Brussels. Because we actually believe that this piece has the opportunity to really change the cultural narrative. You know, kind of, I think oftentimes people ask, what is the one policy message that you're pushing? We can get into them in a second because we did think about this long and hard.

8:32But I think the biggest contribution that this piece can have is it can change the cultural narrative. It can change the way in which people talk about AI, understand AI, and the way in which people emotionally connect to AI. Because right now, too often, it's still abstract. You read headlines about data centers, energy, water, whatever it is. This is a piece where we're really trying to bring you inside kind of the emotional world of the two characters that the piece is centered on. And you kind of have you see the world through their eyes and kind of really follow what that means and kind of deeply feel it inside your bones.

9:05If we manage to do even 50 % of that, I think that is kind of the biggest contribution that we want to make with this piece.

9:11Judith Dada:It's a really bleak future that Europe is heading towards if we don't fix it. One of the things that I find difficult, especially about being in Europe, is that we are not like the US and China in our political structure, right? And there is a piece in the text where it's almost like it was an inevitable consequence of the structure that we have in our political world within Europe. And there's a bit that talks about how it's sort of like an outcome of a lack of courage to do with the structure, it's a misjudgment. When you look at those issues, how do we fix it? If it is an inevitable consequence of the structure that we live in, that Europe is kind of living in, whether it's Brussels or the UK or individual countries versus the EU, how do we fix it?

9:54Judith Dada:How do we fix the structure? How do we get out of this rubble? If Europe was able to differentiate what are the principles that actually matter, what are the procedures that we formed around them? Procedures meaning things like deliberative stakeholder consultation, right? This idea of we can go, I mean, the amount of roundtables that I've been a part of and where everyone kind of, and it's literally, you just go around the table and everyone says something, nothing gets decided, nothing gets built, nothing gets moved on, but everyone was able to say something. Like that seems to be kind of almost an end in itself is just hearing people and having people share something.

10:26There's one example, obviously, the other example being that Europe is complex. It's a lot of different countries coming together and trying to affect change. And in many ways, that was for a long time needed, required and beautiful. But we do believe there's a pragmatism that's required now, a focus on less countries who get more done together. And there's thinking outside the lines of alliances of the past. We talk about this idea of kind of a coalition of middle powers in the peace, where can we partner up with countries like Japan, South Korea, Canada, who have similar issues than we have and who have similar assets, who, for example, each own a crucial bottleneck as part of the semiconductor supply chain.

11:04Can we actually join forces to form a mediating power in between the US and in between China and together, you know, kind of the sum being more than the total sum being more than kind of, you know, each of its parts? And so we're really thinking about these types of changes that get us to stand up for our principles, but it does require, and this is the last piece, it does require hard trade-offs and moving away from the procedures that, you know, kind of have served us well in the past. And so just a few words about these hard trade-offs. There are things in Europe that we will need to let go of, we believe, if we want to still protect those principles.

11:44One example for it being labor protections. Labor protections, they're, you know, kind of something that every single nation in Europe, kind of structures by themselves, works a bit differently in France and it works in Germany, then it works in Italy and so forth. And they are structured such that it's very, very, very difficult for companies to change, to restructure work, to restructure workers. And what we say in the piece is we think the most vulnerable workers will always need protection. That is a principle of Europe. Human dignity will always need to come first. But can we find ways of restructuring the labour system, especially for the highest earners, especially for younger people who are more flexible, can change.

12:21Denmark is a great example with the flex security system that they've built, where it's really a lot easier to hire and fire people. And it's a benefit both for the workers and for organizations. Can we be much bolder in terms of letting go of one of the things, one of the procedures that we formed in Europe, which is this very rigid labor protection, because that's one of the trade-offs that's required to really get ahead. Another trade-off being, if we want to build data centers in Europe much more quickly and at much, much bigger magnitude, then we will need to think about massive deregulation, special economic zones, where you're just able to build much more quickly.

12:55And that will potentially be unpopular with parts of society, where, again, the narrative piece comes in. So it basically just asks us to have a much more realistic view at the current facts and And then a much stronger embrace of the trade-offs that are required to really get us heard.

13:14Judith Dada:And we've spoken about who's driving the bus, right? And you've been critical of the fact that sometimes it feels like in Europe, nobody's driving the bus, but we're kind of sitting at the back along for the ride, hoping that the bus will get us where we want to go. And it feels like people are not taking accountability and agency and doing what needs to be done. When we look at the past couple of years and the mistakes that have been made in Europe, who is it that has been driving the bus and been making these mistakes? And who is it who has the ability or the power to break down these procedures, to either build this middle power alliance?

13:43Judith Dada:Who should we be looking to in the next five years to take control of the wheel and drive us in the right direction? So the piece really focuses on the political leaders, both at the commission level as well as the national level. But it shouldn't end there. Business leaders, I include myself in the group of people who should be driving the us as a VC, you know, and as an investor who tries to, in whatever capacity I have, go above and beyond in terms of helping Europe, helping our story go well. And so the piece is focused around political leaders, but it shouldn't end there. Everyone who has a leadership function in society, including actually every single citizen, because we're all, the AI transformation will need all of us, be that as part of, you know, being an employee, you know, who needs to adopt AI and figure out ways and becoming more productive and finding other ways of creating value, even though parts of your job are now done by AI.

14:40I think in some way this piece should be a calling to everyone. Yeah, yeah. But the political leaders definitely have a focus.

14:48Judith Dada:Is there an inherent tension between the political leaders that we have in Brussels and the EU and the next five years where we want potentially new alliances to form around middle powers, smaller more uh companies countries that can move quicker with a smaller group is there a tension that exists there definitely you know i mean just just naming one tension um i don't believe it's so much middle powers i just don't think i mean we've just seen an alliance with canada um when it comes to you know kind of coherent alifalfa but that was again focused on you know kind of backing a champion you know you could call it picking a winner which is not something that I think by and large, something that we subscribe to, because we believe that we should rather be influencing the broader environment and the broader, the kind of factors that sit upstream and downstream of AI value capture.

15:35But to make it very specific, the EU just put out a sovereignty package last week that is in many ways more ambitious than anything that they've put out in the past, but it squarely focuses on sovereignty in a very, the EU must do it alone without leaning on other partners type narrative. And we think that's wrong. Let's go into detail for why that is. One of the biggest issues that the piece works out is that Europe doesn't have enough compute. We're very dependent on the US for our compute and for inferencing the AI models that all of us use. We don't own the model layer on the frontier LLM side.

16:14And most of the compute, 80 % is hosted in the US and 5 % is on European soil. and with the way that the kind of capex build-out is going right now that's not going to change so what we focus on in the piece is for europe to have a seat at the table again we need to drastically but we mean drastically increase the amount of compute on european soil the way to do that is not as the u is proposing to completely and only rely on sovereign cloud providers right So sovereign European companies in France and Germany and so forth building data centers. But to partner with U.S. hyperscalers, who are the ones who have the scale, who are the ones who kind of have locked in significant parts of the supply chain, because we're talking like a real shortage.

17:00It's not like you can just, you know, kind of grow a computer on trees. Like a lot of the supply has been locked in and has been locked up for the next couple of years in terms of like the demand that's already captured it. And so what we believe the most pragmatic way for Europe, and again, the trade-off is, is in order to achieve leverage, in order to thereby become more sovereign, you actually need to partner with the Americans, which is a little bit counterintuitive. And the EU says, no, we need to do everything ourselves. But we think that's exactly not going into the hard trade-off of actually getting the job done.

17:29It's kind of, you check a theoretical box that doesn't get you anywhere in the end. And so it's really thinking beyond the kind of classic fault lines of, you know, kind of black and white and American versus European, but thinking much more pragmatically from the perspective of we need to build leverage first, almost.

17:45Judith Dada:And I think that point about leverage is like the super interesting point because I really hate the idea of sovereignty because it kind of ties into independence. And we'd rather be independent and sovereign and weak rather than being interdependent and have leverage and strength. And there's really interesting bits in the story, the narrative around ASML. And that's like a super interesting example where we own in Europe like a really important part of the supply chain in the stack. And that seems really powerful. And it's like that doesn't seem what the EU is focusing on the moment. It's focusing on sovereignty in a way that actually strategic interdependence is a much better, more powerful thing that we should be chasing.

18:27Judith Dada:And I don't know, do you resonate with sovereignty? Is that something that you think the outcome should be? Is that a term that we should be using? Absolutely. Sovereignty is important and sovereignty is what this piece is about. But what is sovereignty? Sovereignty, we think, is a country or a group of countries being able to ensure the continued flourishing and protection of its people. Sovereignty is not we do everything ourselves. That is a definition that you can have of sovereignty. It's just not the definition that we share. The definition of sovereignty and being able to stand up for the flourishing of your people is to have leverage and thereby make sure that you can exert that leverage and have a weight at the table to stand up for your principles.

19:10And so, again, this idea that I don't actually think anyone in the U is trying to do everything. I do think we've understood this, but I don't think we've understood it to the extent that we need to understand it. Because building data centers in Europe and kind of bolting them to European laws, even if we have to partner with the U.S. Americans in order to kind of get that done at a massive scale, that can massively benefit us. But people today care more about, I would say, the media political gains, you know, that they get for, because of course the European public wants sovereignty. They should.

19:39We should all, you know, stand up for, you know, being protected by a nation and by, you know, kind of a continent that is able to defend our interests. And so it's easy to clap for something that on the surface level seems right, but not if you actually think things through to the last consequence. And so what we want is we want people to own the outcome. Because in the end, it won't matter how much you've tried. It will matter where you got to in the end result. And today, there's too much representative engagement of, you know, but we did this and we checked this box and we checked that box without people actually owning the end result of what did you actually get done and how much did it meaningfully move the needle in terms of building leverage for Europe.

20:22Judith Dada:And final question then, what does success look like in terms of releasing this narrative, this report? Like, how do you, you've written this thing. It's an amazing body of work that you spend a lot of time with some of the greatest minds in AI in Europe on. You really do want to move the needle. You want to create a kind of vibe shift. It's coming out. In three months time, where would you like us to be? where would you feel like, okay, we've made an impact, we've moved a needle? Yeah, I think there's two really important things. As you said, the piece, when you read it, you listen to the audiobook, it does leave you with a deeply emotional, somewhat gloomy feeling in the end.

20:59And it's important to us to underline that our overall message is one of forward movement and of courage and of a positive outlook for Europe. But in order to really get there, we believe that you need to once at least get to feeling and owning the full weight of the consequences of what would happen if things don't go right. Because only then do you really have kind of the courage and the, yeah, just the strength, to be honest, just the strength to really get shit done, first thing. The second thing is we go into five policy measures that we've outlined. We've touched on some of them. We need significantly more compute on European soil data centers bolted to European law.

21:46The second is we need a coalition of middle powers to come together and own crucial bottlenecks in the compute supply chain. We need flexibilization of labor laws in order to allow for deep AI adoption in the European economy and for the European economy actually to see the kind of productivity gains that will allow it to be competitive with other nations and thereby protect the social welfare system that we rely on that is so important to us. The fourth is we have an important next frontier in embodied intelligence, robotics, world models, where it's important for Europe to really support that ecosystem and make sure that the companies that are building there kind of have the best bases for flourishing and for kind of really, you know, owning one of the next looming crucial bottlenecks in kind of overall AI.

22:41And the last piece is this positive piece, this positive narrative. And I think it needs to be one that is nuanced. And I think people, you know, they look, they see through, you know, kind of shallow messages of like, you know, some AI tech bro saying, oh, everything's going to be amazing on AI. Because people have concerns and those concerns in many ways, we need to take it serious. But there is a fundamentally beautifully positive story to tell about AI. We've been given a technology that if things go right, we'll be able to cure disease, cure cancer, give better education to everyone, make the lives of individuals, of families, of everyone just significantly better.