Kevin Frazier (2:27)

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Kevin Frazier (2:35)

There are so many questions have to be figured out, and nobody came to my bonus class. Let's enforce the rules of the road. Welcome back to Scaling Laws, the podcast sponsored by lawfare and the University of Texas School of Law that explores the intersection of AI policy and, of course, the law. I'm Kevin Frazier, the AI Innovation and Law Fellow of Texas Law and a senior editor at lawfare. My guests today don't require much of an introduction. You've read their work in the New York Times and seen their research pop up in scholarly journals and popular content. I'm excited to have Anu Bradford, professor at Columbia Law School and Kate Clonik, senior editor at Lawfare and associate professor at St. John's University School of Law, joined the podcast. These two are leading thinkers when it comes to the intersection of big tech competition policies and domestic and international law. In the wake of the news recent New York Times op ed on the unavoidability of EU AI regulations impacting US Companies and political interests, there's no better time to talk about these big topics. And with that, we hope you enjoy the show. We spend a lot of time analyzing specific pieces of legislation on this pod, but today I want to take a step back and try to piece together a more general understanding of how different approaches are manifesting in the us, EU and China to accelerate innovation while presumably protecting consumers. Leaders in both the US And EU have made clear that they want to lead in AI. The details of what qualifies as leadership have generally been omitted, but we'll leave that for another day. Still, they have taken very different approaches to achieve that goal. At a high level. We're seeing new dynamics between the private and public actors in both the EU and the US and ongoing competition between nation states when it comes to who will write the rules that shape AI. Anu, you wrote a op ed for the New York Times titled Trump Wants to Let AI Run Wild. This might stop him. You went on to outline how the EU AI act and its related code of practice are already shaping AI development and deployment by US AI companies. A week later, President Trump had this to say on X as the President of the United States, I will stand up to countries that attack our incredible American tech companies. Digital taxes, digital services legislation, and digital markets regulations are all designed to harm or discriminate against American technology. He then said they also outrageously give a complete pass to China's largest tech companies. This must end and end now with this truth. I put all countries with digital taxes, legislation, rules or regulations on notice that unless these discriminatory actions are removed, I as President of the United States will impose substantial additional tariffs on that country's exports to the usa. Anew what is President Trump getting at here what are the specific rules that are inciting such inflammatory language that are coming out of EU with respect to AI?

Anu Bradford (5:47)

So, Kevin, first of all, thank you for having me here for this conversation. And there is much to unpack there. None of this is new. So this is sort of part of the long list of grievances that President Trump has expressed about how the European Union regulates its marketplace. And he has for a long time time made it very clear that the Europeans should back off and respect the American regulatory sovereignty and shield. Basically, he wants to shield the US Tech companies from this discriminatory, unfair, invasive European regulations that hold back innovation in Europe, but also then impede American companies and their ability to shape AI revolution and through other technologies, shape the entire digital economy. So this is, I would see this as part of this broader trade and tech war that the United States has unleashed pretty much against the entire world, including its long term allies like the European Union. So President Trump has asked the Europeans basically, or threatened or bullied or intimidated is probably a more appropriate way to put it, to step away from regulating and leave the US Tech companies alone. And he has threatened the Europeans with his favorite weapon, which is tariffs. But also really, I think, and this is what the Europeans are most afraid of, tied this entire conversation of European regulations into the United States willingness to extend the military support to Europeans and to Ukraine. So that really elevates the stakes when the Europeans now need to confront the reality that if they do not agree to Trump's demands when it comes to regulation, the consequences can be very severe. They can be severe in terms of economic ones, so the tariffs that can be imposed, but also potential loss of military support of the United States. So the US Made very clear, so President Trump made very clear already some months ago that it wanted the Europeans to change their tech regulations. And here we talk about AI act, we talk about Digital Services act, we talk about Digital Markets Act. So the grievances really stretch across the European way to regulate digital economy through antitrust rules, through content moderation rules, privacy rules even, and then artificial intelligence. So the Europeans held firm and as part of this preliminary trade deal that was negotiated when the Europeans were trying to fend off these tariffs did not include concessions when it comes to digital regulations. And it looked like for a brief moment that the Europeans have bought this space where they can protect their regulatory sovereignty. But it didn't take long for President Trump to go back to those demands, which really shows the dynamic that these trade deals have, is that these trade deals are not stable. They do not protect the Europeans from further extortion from subsequent demands. And they are already forthcoming. And now the question is whether the Europeans will give in or whether they will restate their firm intention to continue to regulate the way that is consistent with European values and consistent with European laws.

Kevin Frazier (9:20)

So to take a step back, as you mentioned, anew, that this war has been long stemming, this is not a new fight. This is not a new battle. Way back in 2012, with which feels like decades ago now, but was somehow only about 13 years ago, you coined the term the Brussels Effect, talking about how we see regulations in the EU become the de facto global rules by virtue of the fact that companies, if they want to operate in the EU and tap into that market, they're going to necessarily need to comply with those rules, and by virtue of the way their businesses run, basically make those the rules and regulations they follow for all customers. So how is this Brussels effect manifesting in the AI context? And why is it becoming sort of inevitable that whatever rules the EU adopts, from the EU AI act to whatever may come down the road are the rules we're seeing us AI companies comply with?

Anu Bradford (10:17)

Yeah, so first of all, AI doesn't respect the national borders. These are global companies that are developing the leading AI models that are now being used globally. So you cannot really Balkanize that. The regulations that these companies follow would somehow be just tied to where these companies are being founded. So if you think about the companies, whether it's OpenAI or whether it's not Meta, whether it's Google, they are all active in Europe. Europe is a very important market for them. There are 450 million consumers that are relatively wealthy consumers. So the demand for the AI applications for AI models is rather high in Europe. And the Europeans now, we would say already unsurprisingly, took the lead in passing the world's first comprehensive horizontal AI regulation, the AI Act. It's a binding law, and it really set serious constraints on how AI models are being developed and deployed. So the US Companies that are willing to stay active in the European market are bound by those rules, but then they face this question that whether they actually want to make those changes that they are required to make in Europe across their global production. Sorry. Whether they want to then make those changes to their models that are demanded by the AI act, whether they want to actually make those changes globally. And there may be a few reasons why they do that. So first there's the kind of scale economies it's very difficult to have different products in all the different markets. These companies operate in, sometimes it's easier to standardize and then you adopt the rules that are the most demanding, rules that then give you the access to different parts of the world. One is that they want to preempt regulatory challenges elsewhere. So the EU sets the tone and the external expectations for users around the world. And other regulators are also keeping a close eye on what the Europeans are doing. So the US AI developers know that they may be facing the same regulations soon in Australia, in South Korea, in Japan, in Brazil. And they may as well then get ahead of the game and then already comply with those AI anticipated regulatory changes that they are about to confront. And those changes may also be adopted at the state level in the United States. So that's one reason why these companies may be extending the European obligations elsewhere. And the third reason, Kevin, is that the consumers, the users, they are conscious of various risks associated with AI models. They want to trust those people products. And if you just asked what the public opinion calls for, even in the United States, the users want there to be some guardrails. So these companies have the opportunity to demonstrate to the users that their products are safe. And that is one then reputational benefit that may come with by extending then some of those protections that are stemming from the EU's AI act also outside Europe.

Kevin Frazier (13:30)

And one of the earlier episodes that's given rise to this skirmish or war was enforcement of the gdpr. This was the Comprehensive Privacy act that we saw the EU enforce. And Anu, you yourself have referred to that enforcement as, quote, spotty. And we have seen a narrative develop of, oh, this is just a mechanism for the EU to punish or even tax American innovators to make up for the fact that the EU isn't experiencing as much economic success on that front. Which may explain why the rest of President Trump's tweet was, America and American technology companies are neither the piggy bank nor the doormat of the world any longer. So, Kate, this is pretty amplified language. We didn't hear this from the Biden administration. We didn't see similar tweets from Obama even at the height of GDPR and similar legislation from the eu. How are we seeing Congress and act in response to this narrative? And how is this now counterpunch manifesting in the US in terms of trying to prevent the EU from extending this Brussels effect into another area of technology?

Kate Clonik (14:39)

Yeah, I think that it's happening right now. It's not exactly happening in the AI space, but I do think that it is happening in the other kind of in response to the other regulations that ANU is talking about, which are the Digital Services act and the Digital Markets act in particular and probably like will be bringing, bringing in parts of the AI Act. We have seen. I will back up and just kind of say that we have like we have seen there is a reason that we didn't see this from the, from the Biden administration and that was because the tech companies asked and they like and the administration politely declined to go to be like the bulldog for, for these companies in, in Europe over European regulation that Europe had every right to pass in its own jurisdiction. And so you have for, for various reasons. I mean I will like, I'm perfectly happy to kind of like put a pit like to kind of name it and just be kind of like, you know, there have been massive donations from these companies, from these tech companies to the current administration in various forms, from inaugurate inauguration like funds to other types of deals and things like that that have been going on. And so there is an app appetite to go to bat for that for the tech companies in Europe because what they are facing in Europe with the enforcement of the Digital Services act and the Digital Markets act is either the Digital Markets act is the antitrust element. So there is the chance of kind of high fines and breakup. And there are just even higher percentages like GDPR is a 4% global revenue kind of and the, and the DSA is even higher, it's 9%. And so there's like a, or 10% I think. And so there is truly like kind of a new moment in which we are having a lot of pressure put on tech companies from Europe. And now we have this new administration that's willing to go to bat for them. And you have now seen it. And I would say the latest actor, as you kind of point out is from Congress. But we saw J.D. vance go over and give a very controversial talk in Munich that was really poorly received by Europeans in which he's lecturing them about their sensorial digital policies. That was kind of, I think a surprise to everyone in Europe. And then also if you are a person like Anu and I are watching in the, in the US to see, to see someone like Van, someone from, from the executive care about the Digital Services act enough to kind of bring it up. And that was doubled down on when the FCC chair Brendan Carr went over said similar things on his European tour about the censorship in Europe. And then I mean all that is just talk, right? It's not great rhetoric for, for everything. And it points towards things that are going to happen. But it's talk and it's still talk. Trump's tweet is talk. You know, but there is this shadow of, this is where this becomes, you know, this becomes all of a sudden like, I did not have the DSA and the DMA and the AI act becoming giant cudgels in geopolitical war or, you know, the US threatening to leave NATO or not re upping aid to Ukraine. You know, like in my, on my bingo card for 2025, that there was just, there has been, there has been a lot of this talk. And the latest talk is that in October, Jim Jordan of the chair, the majority chair of the Judiciary Committee, has convened a meeting about Europe's threat to Americans to speech and innovation. And it will highlight how Europe's online censorship laws, specifically the UK's Online Safety act and the EU's Digital Services act, threaten America's right to freely, to speak freely online in the United States. And so, I mean, it is literally a referendum on what a new rights bill, which is like, whether or not these laws are being exercised extra, extraterritorially in the United States in a way that, like, influences U.S. citizens. Now, I will say that that language differs from Trump's language, which is about the companies and the, and like, that this is that you're not going to beat up our companies. And Jordan's language in this hearing is about the censorship that you place on, on US citizens through these types of laws. I don't know that it makes a difference. They're using the fear of censorship, the, like, the specter of sense. This, I mean, this administration domestically, obviously is no great fan of free speech in 8 million ways that we could list. But they're using this as a specter of censorship as a political, as a, as like a political pretext for whatever it is that they want to do and whoever it is that has paid them the most money to serve them. I mean, just to be perfectly frank. And it's, it is a very, you know, I just don't, I don't think that you can like, kind of beat you on the nose about it. Someone needs to kind of be calling this out because this is just not business as usual.

Kevin Frazier (19:58)

So, Anu, I think it's really fascinating to see all this talk that Kate has mentioned in terms of the stakes seem to be rising for the EU to continue to lean into this Brussels effect. And even among EU AI companies we've seen asks for, for example, delays in the enforcement of the EU AI Act. We've also seen reports, for example, from professors Carmelo Cinema, Tobias Kretsomer and Ioana Cassio. I'm butchering probably half of those names, and I apologize to the authors, speculating that we could see enforcement of the Digital Markets act lead to revenue losses of up to $114 billion when enforced. And so there's a lot of pressure mounting, seemingly on the eu. And I wonder, from your perspective, are you seeing a doubling down of saying, hey, we are going to stand by EU values being baked into AI regulation, and if that stretches into the US So be it. We're wearing, we're willing to bear those costs, or might we see a sort of step back and maybe a move away from this aggressive posture, given just how stakes, given just how high the stakes have become?

Anu Bradford (21:12)

So, Kevin, I think what is really important is to understand what you highlight here is that there are now both external and internal pressures that the European regulators are facing. There's the external pressure coming from the Trump administration in particular, telling the Europeans that they are infringing on American regulatory sovereignty. And this extraterritoriality would be an American reason then to attack those regulations. But there is, as you say, also an internal pressure. And these laws generally have been very popular. So all these, whether it's the Digital Services Act, Digital Markets Act, AI act, they do enjoy broad political support from the right and the left. But the politics in Europe are dramatically changing, in large part because the US Is drastically changing, and the Europeans feel increasingly threatened by Americans withdrawing their support as a traditional ally. The Europeans basically been left defenseless in this hitting China US Tech war. And the Europeans now are incredibly, and for a good reason, conscious of the need to build their own digital sovereignty, their technological sovereignty, their strategic autonomy. So often what happened in Ukraine with increasingly assertive Russia, the Europeans are adamant that they no longer can take it for granted that there will be peace in Europe. They need to have the military capabilities to defend peace in Europe. And now that they can no longer trust on the American security guarantees, the Europeans need to do this themselves. And AI is now seen as a key to this revamped national security architecture that the Europeans need to be building. So the vulnerabilities on the Europeans being dependent on key Chinese or American technologies in order to defend the continent is seen as a critical vulnerability, is seen as a critical vulnerability that the Europeans need to address. So the conversation in Europe has shifted from this idea that we no longer have the luxury just thinking about digital rights, digital protections, but we need to be More assertive. We cannot just regulate technologies. We need to develop those technologies in Europe in order to shed those vulnerabilities and dependencies. So this pursuit of greater technological sovereignty now gives the narrative and a very strong political reason to say that, look, we can no longer pursue any measures that would hold back European innovation. And there is this perception that so called excessive regulation of artificial intelligence is what is holding the European AI development back. And I am absolutely concerned about the absence of leading European technology companies developing these critical technologies technologies. But where I differ from these, these critics of the AI act is that I don't think it is the regulations like the GDPR or AI act that are holding the Europeans back. Even if the Europeans just decide to scrap the entire AI act today, I tell you, all these AI companies would not be emanating from Europe five years from now or even 10 years from now. There are much more fundamental pillars of the tech ecosystem that need to be rebuilt in Europe. And those are the ones that explain why the leading AI innovations are today coming from the US and China and not from the European Union. And regulation is a sideshow compared to these main reasons that are holding the Europeans back. So my key argument is that the Europeans should stay firm, continue to protect the digital rights, because that is embedded in the values of, that are critical of the ethos of the European Union and European citizens and the whole European polity supports them. But at the same time, the Europeans should be mustering the political will to then undertake other reforms. And we can talk about those other reforms that are absolutely critical so that the Europeans are not just regulating but also developing AI technologies.

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Kevin Frazier (27:05)

I really want to center on this point about digital sovereignty because it was a conversation that popped up, I think originally around the GDPR and shrems and all of the privacy considerations around, around data localization and servers in the cloud and so on and so forth. So we've been having a conversation about sovereignty for a long time. But arguably AI has put this notion of full control over your tech stack onto the headline of, of every major article. And Kate, I want to come to you because we're talking in late August of 2025. We just saw the announcement a few days ago of a 10% equity stake by the US government into Intel. And we've since seen President Trump say that's just the beginning. We've even heard tell that perhaps defense contractors may be the next companies that the US claims and owner in ownership stake in. How is this related to this ongoing conversation around control over your national tech stack? And how is this challenging? Some of the earlier narratives we used to see around tech maybe distancing itself a little bit from the federal government to now having it as an equity, have an equity stake in it. It's just help us make sense of all this.

Kate Clonik (28:26)

Yeah, I wish that like if we could like pivot the camera and like you could see my giant board of string and like and thumbtacks and like how all of these things are connected in every different way. No, I'm just kidding. But I do kind of feel like, like that is, I don't know, you can nod your head like you agree with me because, but I, but because I just, I increasingly feel, and anyway, you have to feel this way too a little bit. But like, okay, so we talk about the tech stack and a lot of these companies, the ways in which they compete with each other are not monolithic. They are not competing. Most companies don't have a single stake in just Hardware, just chips, just servers, just like logistics or just like speech platforms. They are like quadruple, triple leveraged in various markets in various ways and they compete with each other in kind of ways that are almost, I think I have not like done a full job keeping track of. But you can't be remiss about the fact that Apple has an Apple store that was going to be hit with giant fines around the TikTok ban and also wants to be exempted from China like the tariffs about manufacturing their enormous, like their enormous like iPhone and like and hardware manufacturing. They want to continue to be able to do it in, in China like without kind of tariffs. And so there are these like they're, they are seemingly, seemingly like kind of non tangential interests. Right? Like on the face of it TikTok, the TikTok law should have nothing to do with the manufacture of iPhones in China but they are under the same umbrella in like this certain type of way. And so you really have to wonder when you get into these rooms with these people and you have like this new, I don't know, I'm going to generously call him a dealmaker president like kind of wheeling and dealing with things, what is being treated. And one of the things that you mentioned is like this new craziness around chips. And I have been, you know there is a, there has been the chips act. There has been a huge push to kind of like to create an industry in the US that is domestic and there have been factories in Arizona and Texas that have been getting built for the last couple of years. So this is not like new and this is actually like there might be, I don't know that they'll ever catch up to Taiwan but like they are certainly on, you know, they're certainly starting to get in the game. And all of a sudden you have kind of this overtake of 10% of intel by the government. Well like what does that mean? And it comes right on the heels of this news about AMD and Nvidia taking like paying a 10, a 15% tithing essentially to the US government for reasons I cannot discern around, around kind of their profits chip manufacturer. And so like I'm just kind of like I'm just trying to understand. They, it all seems to me in small ways like that there, there are these things that the administration is trying to gain access to these things that it is trying to give so that it can take them away and threaten it later. Right. You make, remake your budget around a 15% tax or you think that your 15%, your 15% tithing to the U.S. government on your chips is going to protect your industry for now. I mean, this is like a classic kind of like mob story, right? Well, it's 15% now and then it's 20% and then it's like, oh, do you also want protection from China? Like, you know, and so there is like, there is this there you can just see the ratchets being put in place, I guess is the best way. And it's not as if these ratchets didn't exist before, but they certainly no one had their hands on the ratchets in this way and were like, do you want us to. Little bit more, A little bit more. And so this is, I do kind of want to say that this is setting the stage in ways that I don't think any one person can 100% grok how this is all going to end, play out, or what the pressures are going to become or what the needs are going to be of these companies. But I do think that it is that that is kind of what we're seeing in the big picture is that is the setting of the stage of things that the US Government is allowing or taking that they can take away. And that is, I think, basically, I think that's a huge part of this story.

Kevin Frazier (33:04)

Well, speaking of huge parts of this story, we've so far omitted a China shaped hole from this conversation. And Anu, how is the pressure and the perception that both the EU and the US and really the rest of the world are in a sort of race or competition, or pick your metaphor with China? How is that really the umbrella narrative that's shaping so much of the discourse between the US and the eu? Because from my own vantage point, it really does seem like this all boils down to who gets to write the rules of the road and a realization among the US and the EU that China is seemingly with every year, if with every day, becoming more and more equipped to lead some of these conversations when it comes to having the most infrastructure, having the most talent, having the most data, so on and so forth. So how do we think about that huge variable in this equation.

Anu Bradford (34:00)

Yeah, so that is obviously the big reason why the US has become so focused on the geopolitical rivalry and the technological supremacy, the need to win the air race, is that it is conscious of the strides that China has made and continues to make in this space. So China is a formidable innovator today, and I think nobody can deny that. And yes, I think there are many who say that the US has some advantages vis a vis China. And the US still by many metrics, leads that AI race. But for instance, when Deep Seek unveiled its very capable yet low cost AI model, that was a moment when the Americans realized that China is playing to its advantages. Which is not that China is obsessed with pursuing necessarily the most foundational AI advances. It's not really thinking about when is artificial general intelligence here, but it's really focusing on capable applications and bringing down the cost of these models so that we can really apply them and bring real value to the economy. So that's something what I think makes the US laser focus on these relative advantages that the US has over China. But at the same time when the US is so focused on what China is doing, I think it's handing many advantages to China. So one thing that really has kept the US ahead in the AI race is that the US has been the place that attracts the global talent. The US is not just recruiting from a domestic pool of very capable, well educated AI scientists. It has been the place where the best minds from all around the world, including China, come to the us. They come through US universities, they send, stay here, they start companies here, and they benefit US innovations. And now this administration is turning its back to that very advantage and hence undermining one of the most important pillars of the American AI success story. China is very willing to welcome the top AI scientists that are ethnic Chinese back to China. And now the question is whether the Europeans have an opportunity there by then offering pathways for those immigrants who are no longer welcome to the US or who are no longer welcome even to US universities to find Europe as the place where they will continue to innovate. So that's one aspect of that US China rivalry. But we see that happen at every level. The US is trying to prevent China from building those capabilities. We see this as the example of preventing China's access to chips, the most capable chips manufactured in the us. But then at the same time the US is laser focused on building its own capabilities. And in that process, I think US is in many ways turning into the Chinese model. In the book Digital Empires, I describe China having this state driven model, Americans having this market driven model, and the Europeans having a rights driven model. But now both the US and and also to a large extent Europe are starting to turn towards the state driven model. The Europeans in their desperate pursuit of technological sovereignty, but even more so the Americans in implementing export controls, taking over these companies, restricting investment into the US companies by Chinese players. So in many Ways I think the, what I fear is that the US is giving up on the very advantages that have served the US tech on a tech economy over the years. That really helped explain the Internet revolution and why the Americans did so well in that and why up until now or up until recently, the US has had such an advantage in an AI race as well.

Kevin Frazier (38:08)

Yeah, and this really brings home excellent reporting and research by a group at the Hoover Institution that published a report called Deep Peek into Deep Seek. And if you go and read that report, you'll see a lot of that talent was homegrown. They're based in China, they went to Chinese institutions. A handful had some experience in US but the narrative that AI talent is exclusively held in the US is just bonkers and inaccurate. And Kate, I wonder how we start to think about the perspective of the companies themselves because we see such a tension of the fact that we know that AI development is inherently international. Right now you have to work with tsmc, you have to work with asml, you have to get data from around the world, you have to try to get talent from around the world. Companies presumably want to be able to operate around the world and to source energy from the Middle east, for example, so on and so forth. So how are companies navigating this push and drive, as Anu mentioned, toward a state based regime and towards sovereignty as such a foundational driving policy narrative?

Kate Clonik (39:21)

They're sending their workers to Canada to work remotely. I'm not joking. Like that's actually like what I'm hearing. I've heard from, I have like, I kind of am collecting reports from a lot of my friends in tech, but specifically like in parts of tech that are not the C suite that are kind of like the, on the, you know, on the factory floor as it were, that principal engineers, the people that are really kind of the innovators behind a lot of new products and that they bring in, that the tech companies bring in from all over the world on H1B visas. And a lot of them have stayed here and have made, have gotten PhDs here, have made their lives here, have married Americans here, have American kids. And I just heard about, you know, one engineer, one principal engineer at Google that is headed to Ottawa and because their visa is up. And I mean that is that it's not just, I'm not trying to be anecdotal, that is one in a, like a host of examples that I'm speaking about and I couldn't agree with anymore. This is absolutely was the working for us salaries at these Companies in these, in these complexes. I mean, if you've been in these complexes. And I had, you know, one of the side parts of like, when I was like doing my embedding at Facebook, when I was doing the oversight board, was I just hung out there all the time. So, like, I was there, you know, sitting and like, writing notes in between interviews and shadowing people. And like, you would just see people, engineers, and you know, they have these giant, giant cafeterias with 25 different types of amazing cuisine and food, and it's all free. And you would see at the end of the day, around 4 or 5 o', clock that people would show up with their entire families, would show up at the, at the, like the Meta complex and like, kind of in Menlo park and just like bring, I mean, these, these people have created their entire lives on coming to these big tech companies. And it's not just for free food. It's like an incredible salary. It's incredible opportunity. It was incredible opportunity and it was incredible, incredible, incredible talent pool that you were able to get with the US and the US Was famous for fostering. It was kind of a beautiful story. I actually really liked it. And one of the things that I wanted to write a story about at one point was that actually that the, that when there was a lot of worker dissent at these companies, at these big tech companies, during periods of like, tech lash, that you would not get, that one of the problems that you would not have from US tech companies was too much worker dissent because so much of their workforce were like, were like indebted to and reliant on H1B visas from these companies to maintain their jobs and their lifestyles and their lives. So there was just, there was going to be a floor to like, how much dissent you could get. I mean, now we're talking about this in a completely different context and a completely different problem, but I know that Europe has in part tried to kind of pick up some of this talent and has been trying to in small ways, kind of pick up some of this talent, not just from tech companies, but from biomedical companies and a lot of other universities and things like that. Canada is certainly trying to kind of roll out the red carpet for these things, but I think Anu is completely correct. The thing about, like, kind of the fact that Europe doesn't have to not be innovating in tech, there's nothing that like, keeps all of this and makes this kind of attractive in the US I will say that the one thing that is a hurdle is not like the regulatory, the regulatory world that like is coming out of these massive EU level level regulations, but really the regulatory hassle at the state level of all of these companies. Germany is a morass, famously. France is quite difficult to launch a company. And there are new efforts by various, by kind of the leaders of these countries to specifically make exceptions to this administrative kind of bureaucracy for new tech companies and new companies that are setting themselves up. And I think it's had some, a lot of success. But if you had a choice between kind of like popping up an AI company in Bethesda and popping it up in Mont Blanc, you're going to have two different types of, you're going to have two different, you're going to have two very different types of experiences. And if you have the flexibility geographically to go to one or the other, I think that like, and I wonder if Anu actually disagrees with me or you're still going to set it up in Bethesda.

Anu Bradford (44:13)

But the ethos of this company, not only being able to attract the best talent from around the world, the reason they have been so successful is that they have really embraced globalization in all senses, in how they set up their supply chain where they find their users. And it became very important for them to be able to tap into that market. And Apple I think is a prime example of that. So now when President Trump really wants Apple to re show all the manufacturing in the United States, I think it just shows the impossible philosophy of that kind of economic nationalism that this administration is pursuing. So Apple iPhone. If you think about the newest iPhones, they have like almost 3,000 parts. They are put together in 28 different countries. They have 187 suppliers. 5% of that phone is manufactured in the United States today. And if you really were to repatriate it all that, all of that supply chain to the United States, the price of that iPhone would be 3500. It just doesn't work. So we are not going to see those tiny screws to be all tightened in the United States, even though this, this was the vision of this administration. So in many ways I don't think the idea that somehow we want to make these more national companies reliant on domestic workers, domestic supply chain, that is really going to erode the very success of these companies. But then to go to what Kate was saying about the impediments for innovation in Europe, there are still some really serious problems that the Europeans need to now critically address. So one of them is that there is, it's not really the European level regulation that is problem. It's like Gates says, the national regulations, the diversity, the fragmentation that the companies are still confronting. So there is no digital single market in Europe. There are still different regulations often layered on the top of the European regulation. So different implementation in 27 different markets. So that makes it very hard for the European tech companies to scale across the eu. The second thing is the availability of capital. There is no integrated, deep, well functioning, lucrative, sorry, there is no deep integrated capital markets in Europe. So European tech companies often do pretty well in the first few funding rounds, but as soon as they need more money, they need to turn to US venture capital or then they acquired by one of the US tech giants. So the availability of capital is a much greater impediment for European AI startups than the AI act is. And the third, there's also this risk aversion that is holding the European tech entrepreneurs back. And there are two dimensions to that. So one is punitive bankruptcy laws. Failure in Europe is often fatal. You start your company, if you go through bankruptcy, you never raise money again, you are done. And the second is also this kind of cultural attitude. There's a lot of stigma associated with failure and America is much more forgiving there. The bankruptcy laws are more forgiving. They allow for the second chance. And there's also almost this baked into the Silicon Valley success model is that you try to do hard things, which means you are going to fail and then you learn from those failures and then you try again. And then I think the fourth one is what we already discussed is access to talent. The Europeans have not been as successful as the Americans in attracting the world's best minds to help the European tech ecosystem grow. And this is now the opportunity for European to address that. And I really, really hope that the Europeans will embrace fully this opportunity alongside in making these changes, whether it's to bankruptcy laws or the capital markets, or finally doing what is really just at the very core of the European Union does, is to integrate that digital single market.

Kevin Frazier (48:30)

Well, it's certainly going to be a wild couple of years to watch the full limits of this Balkanization move of just realizing that at some point we are going to run into economic realities to your point anew, that we can't repatriate everything, whether it's the us, the EU or China. And as both of you were pointing out, kind of the predominant factor that we're going to have to watch is who has the leading innovation culture and who can sustain a culture of risk taking and betting on some of these massive new technologies. And unfortunately that's something we're not going to be able to answer in today's podcast, but something we'll certainly keep an eye on. So with that, Anu and Kate, thank you so much for joining.

Anu Bradford (49:12)

Thanks for having us.

Kevin Frazier (49:16)

Scaling Laws is a joint production of lawfare and the University of Texas School of Law. You can get an ad free version of this and other Lawfare podcasts by becoming a Lawfare material supporter at our website website lawfairmedia.org support. You'll also get access to special events and other content available only to our supporters. Please rate and review us wherever you get your podcasts. Check out our written work@lawfairmedia.org you can also follow us on X and Blue sky and email us at scaling laws lawfairmedia.org this podcast was edited by Jay Venables from Goat Rodeo. Our theme song is from Alibi Music. As always, thank you for listening.

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