Forecast 2050 - Episode 8 - Matt Clifford & Ian Hogarth on the UK & Europe - Transcript

Matt Clifford and Ian Hogarth believe Europe is roughly a decade behind the United States in building the technology companies that will define the next era. But they also believe that the gap can be closed, and that the UK and Europe could even leapfrog America, if political leaders and the public make fundamentally different choices.

I sat down with Matt and Ian to talk about what Europe needs to do to save itself from stagnation. We get into why Europe’s risk aversion is a bigger threat than American superiority, why career politicians won’t survive in the new multipolar world, and why the pro-growth movement is losing the culture war — and how to win it back.

Watch the full episode here:

Transcript:

The Compounding Effect: Why the US Is Winning

Finn Murphy: Very lucky today to be joined by Matt Clifford, co-founder of Entrepreneur First, recently advisor to the UK government across a whole bunch of technology areas, and a longtime friend, Ian Hogarth, co-founder of Plural Platform. And what I want to talk about today is what kind of has to happen over the next 25 years for the UK and Europe to maybe not even catch up to the US, but to actually overtake it.

Going back to say, 2001, Tony Blair is PM, New Labour is positivity and hope. Europe and the UK’s economy is at least at par with the US. You guys have been in this country when that was the atmosphere. Can that atmosphere be recreated, or what has to happen to get there?

Ian Hogarth: I guess if you go back to that time, the seeds of the US’s current outperformance in technology had already been sown. You had Microsoft, Amazon, Google, Apple, Nvidia. These trillion-dollar companies were sort of in their scale-up phase. And if you look at the current outperformance of the US in AI, so much of it has been enabled by the balance sheets of those companies, both in terms of their data center buildout, buying DeepMind, investing in OpenAI, investing in Anthropic.

And so I think the real lesson is that technology ecosystems compound, and the compounding effect takes decades. And the US has been compounding for a very long time. It’s that story of a great founder building a great company. The employees, the founder, the investors all go on to be more ambitious the next time round—the Zip to PayPal to SpaceX, Tesla, X arc of someone like Elon.

And so I think the interesting question is, if it’s ultimately a compounding series and, you know, the US has compounded over some number of decades, since sort of Fairchild, China’s been compounding, but China has done it much, much faster, partly because of a kind of captive ecosystem without allowing as much American technology companies in, and partly a number of other factors.

The question is, what would it take for Europe to sort of accelerate its compounding in a more radical way, slightly more inorganic way? Because I think Europe is roughly a decade behind the US today in terms of its kind of the number of billion-dollar companies, building ten-billion-dollar companies. People starting, all the kind of core inputs are around a decade time-shifted behind, which should make us very optimistic actually by the next decade, because we’ll see some really enormous companies come out.

But I think the question that any policymaker who cares about this should be asking is: are there inorganic things I can do to sort of jump five years? And I would say the main thing is hyper-strategic procurement spend, because that has been the thing that has both driven a lot of what’s happened in the US. Like space wouldn’t be SpaceX without NASA spend, and is currently driving the defense boom in Europe.

Jumpstarting European Growth

Murphy: When you think about, say, things like procurement, you’ve been inside this bubble, developing the political will to actually go and make these things happen, and then also bringing it to the electorate in a way that gets them excited. Do you think that this kind of stuff is possible in the current political environment?

Matt Clifford: It’s possible. I think one of the things that’s a huge strength for the UK, at least for now—and it’s not, we could break it, but I think there’s a bit of runway—is that actually our institutions are extremely flexible. Arguably, actually, the UK has some of the best governing institutions in the world from a sort of flexibility point of view.

I think what’s happened, and to give my riff on the question you asked Ian and bring it around to the procurement question: I think in 2001, you had a country that was at ease with itself. There was a confidence about what the UK was, really driven partly by economic growth. I think these things are really mutually reinforcing.

I do buy it, as you would be surprised to hear, that the argument that there’s something about having sowed the seeds of long compounding in tech that explains the US’s relative outperformance. I think the other way of looking at it from a European perspective is that we had actually a really great run up to 2008, and really the key date in many ways, I think, in the relative stagnation of the UK and Europe more broadly is the global financial crisis.

That did a bunch of things. One, it did break what looked like the engine of growth. I think it massively reduced public trust in business, and actually especially in the nexus of business and government. By the way, I think it also—we were worse at talent reallocation following the financial crisis than the US was, for I think both cultural and legal reasons.

But I think the other thing that feels to me really, really important is that if you want a government that is able to procure in the way that I think Ian is describing, you have to actually have a level of tolerance for error and controversy that I think has been sucked out of the system. And I think a big thing that’s gone wrong in the UK and Europe over the last eight or 18 years, I guess, since the financial crisis, is actually a cultural fixation on the negative tail outcomes from effectively just the variance that exists in the world.

And so I think in a way that cultural characteristic is uniquely bad in an era where actually the returns to scale are really large, because anything big with high variance is going to have some visible bad symptoms. And you can either say, well, we’re going to take the area under the curve and use it to pay to mitigate the bad symptoms, or you can play whack-a-mole with the bad symptoms and shut the whole thing down. I think that’s broadly where we got to.

We Must Risk Failure to Succeed

Hogarth: I definitely think that, like, writ large, there is a lot of risk aversion. What’s interesting is there is enough risk-taking to, if you amplify it, right, to see magnificent things happen. So risk-taking was present in the foundation and vision of DeepMind, an extraordinarily out-of-distribution strategy to take. I think the approach they took turned out to be very prescient. And the challenge is just that it got sold too early.

Another example of risk-taking would be Max Planck Institute in Germany spending billions to develop more and more advanced stellarator fusion devices using high-performance supercomputers in a way that is hard to actually describe as the actions of a government-funded entity in Germany. People like to talk about shutting down fission plants. They like to talk about Russian gas. They don’t talk about, well, the German state also basically brute-forced this amazing breakthrough in nuclear fusion.

And I think what’s kind of amazing about technology is the sort of seed crystals you need. You don’t need that many of them. If you get a chemistry lab and you let it fulfill its maximum potential, or a stellarator in Germany photonics in the UK, or hypersonics—any of these areas, if you just let your seed crystals get to their maximum size, you can be amazing.

Clifford: Isn’t this partly a question of whether that activity can take place outside the kind of gaze of scrutiny for long enough to get to a scale where it can survive? Because I think, I mean, obviously I agree with all that, and because both of us spend most of our lives trying to help people at the individual level take risk and do great things.

But one thing we talk about a lot is the lack of scaled risk capital in this country and in Europe. And I think all these things have many causes. But if you wanted to point to one thing, especially our pension funds do not invest in risk capital. Why is that? Well, it’s kind of new. If you go back to your day of 2001, this is a slightly stylized fact, but it’s something like 73% of UK pension assets were invested in equities. And today the number is about 23%.

Why did that happen? Basically, because some pension funds took too much risk and ended up underfunded relative to their obligations. So you can either say, well, this is a systems-level problem, it’s a cultural incentive thing, or you can play whack-a-mole. And what we basically did was make it incredibly hard and painful for you to take risks in pension funds.

But then that means that when you go to DeepMind, who is taking risk, or a scientist who is taking risks—the people behind them, which don’t have to be glamorous people, it can be the West Yorkshire pension fund ready to pile in to make sure that it gets fruition. I think today the answer is no.

Crisis as Catalyst

Murphy: What do you think actually enables that sort of cultural change? Because what you’re talking about is the 2008 financial crisis is an example of maybe a crisis that governments in Europe did not use to their benefit, which the US did. Do we need a crisis to shake the system, to move that risk capital or move that risk appetite for failure in a different direction? That potential crisis being...

Clifford: I mean, we’re in a...

Murphy: Crisis.

Clifford: Yeah, I mean, we’re just in a slow-motion crisis. And if the loss of potential output that we’ve experienced since 2008 happened in one go it would be the single biggest economic event in our history. We’d probably, given the pandemic, we’re talking about a 30% plus loss of output that’s happened.

I think the answer to your question is that it takes leadership. When was the last time you saw a European leader ask the public to change their relationship with risk, warn the public that they weren’t going to respond to every negative symptom of the system, and actually make a deal?

Hogarth: Well, I think we have a contemporary example in Germany. So there are sort of two styles of leadership. One is to be hyper-oriented to the challenge as it gently and gradually emerges. So I’d say this is like Google facing AI. You had Larry Page personally championing the acquisition of DeepMind, creating the conditions for Demis to feel safe to build his vision. You had the creation of the TPUs, a decade-long, ten-billion-dollar-plus capital investment to get to a point where you had a sort of sovereign chip supply for your own models. Like, these are extraordinarily prescient, long-range bets that Google was making.

That’s one style of leadership, and the other style of leadership is to kind of be a little bit not paying attention, but when the thing comes along, you seriously get your act in gear. And that would be like the Zuckerberg style. I would say, well, he wasn’t really doing AI seriously at all, but is now trying to be, trying to win in the same way, but in a much more radical change later in the game.

And I think basically European political elites tend to look a bit more like the latter than the former. And I think for Germany, the meeting between Trump and Zelensky in the Oval Office, Vance’s speech—Vice President Vance’s speech—at the Munich Security Conference were kind of these events that sort of jolted them into: we need to do something differently to be a different kind of partner to the US, a different kind of player in Europe.

And they’ve basically allocated a trillion dollars to be spent over the next decades, or 100 billion a year, into energy technologies, defense technologies, advanced sort of chokepoint technologies. And that is now happening. And so I think that settlement has already happened in one European country. We just haven’t seen the effects yet ripple out. But every single hard tech startup in Germany has just got a massive boost.

The Multipolar Moment

Murphy: Has the US kind of—what’s happening in the current administration—been this thing that’s turned a slow death into a “we have a crisis that we have to deal with now”? Do you feel that in the conversations you’re having? You don’t want them to be an adversary, but actually an adversary might be just what Europe needs.

Hogarth: I don’t see the US as an adversary. I think that for me, the relationship between Europe, the US, and China is kind of like watching GPT-1, 2, 3, 4, where at some point China deviated from the fitting into the US-led world order. You started to see the emergence of a multipolar order, and that has just had lots and lots of consequences.

And you saw some of the more striking things happen under the first Trump administration. But under the Biden administration, ASML was prevented from selling machines to China. It’s Europe’s best technology company. The key chokepoint technology of this era was kind of controlled by the Biden administration. And now we have Trump 2. I think it’s just a long-running transition to trying to adapt to a multipolar world.

Clifford: And that’s hard, right? I mean, it’s really hard to overstate the degree to which the whole European project obviously is in reaction to the horrors of the 20th century, and it is deliberately a variance-dampening device. And that’s not—that is a feature, not a bug—in the elite culture of Europe. And I think we should give a bunch of credit for the achievement of that, right?

I think what we’re seeing, though, rightly, is people around the world, especially people who’ve felt that their relative status decline over a 50-year period, or whatever you want to call it, a generational period, say, well, actually, maybe variance dampening isn’t in my interest. And certainly Trump 1 was like a taster of what variance amplifying looks like in a leader. Trump 2 is that and then some. And I think it is—I think we are seeing some adjustment. But I think it is understandably an enormous cultural shock to basically have come through a generation of taking great pride in variance dampening and being in a world of variance amplification.

Murphy: The world is not heading to your point into a world of smoother hills.

AI Nationalism

Murphy: How do you change your posture towards that over a long-term time horizon? Ian, you’ve written about AI nationalism and even figuring out what is the ASML in Holland, TSMC in Taiwan. Do you lean into specialism in a world of higher variance and multipolarity?

Hogarth: I think you win power law races basically. So you identify branches of the technology tree where there is going to be an extraordinarily large change, and you try to make sure that the preeminent company in that space is in your territory or an allied territory. I think the hard thing there is you basically need states to start to act like the best VCs in the world, and “the best VCs in the world,” all missed general-purpose AI. So it’s not easy. It’s not easy, you know.

Clifford: But this is important, right? Because I think the traditional meaning, the last 50 or 60 years’ posture of states has been to say: if we encounter variance amplification, our job is to mitigate the downsides of that. Now that doesn’t go away. I’m not like chaos, right? The opposite. There’s all sorts of things that we’ve actually done and not done, which we could talk about.

But I think this point about how do you position your country to take advantage of the extreme right-hand side of the tail is actually—I mean, the really crazy thing, and again, I’m not claiming to be one of the best VCs in the world, but if I was even a bit, you know, like it’s now very expensive to get in the AI game at the state level. But in AI nationalism in 2017, it was cheap.

Now you could say there were many such things that were wrong, tokens were cheap, but I think there is something about…it is very hard to pick winners. It’s not hard to pick the races that the winners are running in, or it’s much easier. Maybe it’s fairer than not hard.

And I think just the impact of having an OpenAI or a DeepMind or Anthropic, or the fusion company that eventually wins, or the quantum computing company—these things are just so much bigger. And I think that if you look at traditional industrial policy, it’s actually much more about mitigating the downside in a lot of ways than it is about saying, I think there is a good argument to be made that sovereignty today is somewhat downstream of having a trillion-dollar company. And if you don’t have that, then you don’t have a seat at the table. Well, cool. Then are you trying to—are you trying to play the games? Are you trying to run the races where you could have won? Because if not...

Hogarth: And it’s this interesting thing where not all trillion-dollar companies are sort of created equal. Like, given the choice of TSMC is based in your country or Meta is based in your country, I would pick TSMC. I think it’s fundamentally—it has deeper, more enduring moats.

Clifford: But there is a really interesting thing. States are still really powerful. I mean, I think one way you could respond to this whole conversation—the era of states is over. I don’t think that’s true at all. I think that so few states are truly seeing the role that they can play in this sphere of technological sovereignty.

Hogarth: Yeah, I have a framework for it, which is kind of like, in the same way that incredible founders that can build a company like TSMC, like a Morris Chang—I think they don’t come along very often. They’re very precious, special individuals. I think the same is true for basically these kinds of re-founders of a country. So like a Lee Kuan Yew or an LBJ, that level of political talent that can kind of operate in a new area of the distribution—I don’t think they come along very often.

And therefore, in this next era, any country that is run by someone like that is going to, I think, be able to do really interesting things because it’s so unusual. It’s kind of like watching what Satya Nadella did with OpenAI. It just looked—it looked very different because not many people running large companies could make those kinds of moves. That crazy weekend where he rehired Sam and Greg? I was thinking about that. I was like, that’s such a crazy thing to do on your weekend, just to pull that whole thing off.

Career Politicians Won’t Survive the New Global Order

Murphy: We’ve all spent our careers backing entrepreneurs. We haven’t necessarily gone and found people to go into politics. Is it a recruitment problem of getting people excited about that? Is there a threshold where the most talented people, instead of working on technology companies, will go into politics? Or do you think those two skill sets are actually completely universes apart?

Hogarth: I don’t think it’s quite fair to frame it as a failure of political leadership, because I think that’s almost like saying it’s a failure of founders or something, because I think it’s just really hard to be good enough to make a really big difference. Like Lee Kuan Yew—he’s just an extraordinary, extraordinary individual and in a moment in time. But what he did for his country’s standard of living and security is so unbelievable if you just sort of objectively step back and look at it. So I just think that’s very, very rare.

I think it’s interesting to ask the question of: what could we do to create a higher likelihood of that happening in lots of countries? And I think it probably is about some of the most talented people in a society being more comfortable with their life being spent on public service and the incentives that can lead to that happening. Matt once recommended a great book to me called The Fall of Public Man, which is basically about the weakening of those incentives. But it’s not a great gig being a politician in the West at the moment, right? You get assassination attempts.

Clifford: Yeah, people underrate the base rate of political violence in the West now. It’s actually quite high. I think there is another thing, though, which is we’ve both done stints in government, and I think for both of us on the way in, the most important thing to us was actually just: will we be able to do things? And we were lucky that we were both doing net-new things, and so in a way it’s easier to create room for maneuver and real agency in those things.

But quite often—I know the same is true of me—we get asked, how can you recommend someone who could come in to do X? And if that X activity is in an existing part of the system, the bar to actually having enough freedom to do the stuff that you would want a founder to do is just so high.

Again, I don’t want to be a broken record, but I think it comes back to: well, can we tolerate either the reality or the perception of loss, failure, preferential treatment? There are all these things that are actually—if you look at how founders behave, again, I’m not saying all of these are appropriate to translate one-to-one into government—but it is actually about taking a lot of risk. It’s about relying heavily on personal networks and trust about people. And it’s a lot about doing things that people say you can’t do. Those don’t translate well into government as it is. But again, I think my guess is Lee Kuan Yew would be really good at making space for founders.

The Apollo Moonshot for the UK

Murphy: What is an area where you can educate the public and say: we’re going to take a ton of risk on this massive bet? Maybe not dissimilar to JFK and “we will go to the moon.” It’s actually a very good example. The Apollo 1 astronauts died on the platform. There were many accidents, many disasters, there was so much spend. But because there was political will to create this exciting goal, people got excited. Is there an Apollo program for the UK that you can get people jazzed up about to go on that risk journey?

Clifford: Two things about that. One, it is actually remarkable how much of US GDP went on Apollo, but I don’t think it needs that today. Part of my point about Ian calling AI early is that actually, what you want to find is: what are the things where a billion today makes a big difference? And the truth is, a billion pounds is a lot of money. It’s actually not a lot of money to the government. And I think there’s still a lot of technologies that have a shot at being as big as fusion or whatever, that for a billion a year today, you would be the world’s obvious place to do it. So that’s the first thing I’d say.

I think the second thing I’d say, though, is that to me, the key is: you don’t want to be having a conversation with the public about everything you do. You want to be telling the story about what you’re trying to do. I don’t think it necessarily is that the Prime Minister should be on the TV explaining why stellarators are superior.

Murphy: I mean, it would be great!

Clifford: I’d really like it. There’d be lots of other benefits. But I do think that it is weird that we have not tried to sell—and again, this is not a point about this government, this is a long-term thing—we’ve not really tried to tell a story about why creating new industries, including the failure that comes with that, is a bet on the people of this country.

And that I would like to see at the macro level a lot more, because otherwise there were lots of mistakes made in the pandemic, but it does drive me crazy when I read the press today about the Future Fund, which was this—and it’s like, “a company the government backed failed.” It’s like, no way. Our ability to actually tell stories about failure—not as a good thing in itself, it’s never a good thing in itself, and it’s always annoying when people say that—but we’re trying to do hard things. Things are not going to work. I don’t think we’ve got that narrative right. And until you get that right, I think it’s hard to sell the public on any one thing.

Hogarth: I guess the super-optimistic take is something like: I’m not really sure there is any important new branch of the tech tree where the winning company can’t come from the UK. I think that you’ve got such great academic and engineering foundations across most areas of science and technology. If you have the absolute best risk capital, I think you have a pretty good chance of sort of forming the thing.

The bit that I haven’t described, though, with risk capital and the underlying talent is the singular founder that kind of has the ambition and vision to do it. And I think the challenge there is creating the UK to be an amazing place to live and do things. And I think that’s about atmosphere, it’s about security, it’s about schools, it’s about healthcare, it’s about all these other things.

But I think what’s so exciting in some ways is it’s kind of all to play for. As an example, take fusion. I think if the UK said we are going to be the absolute best source of risk capital for fusion, you’ve already got Culham. Culham is where the Joint European Torus is—kind of already an incredible epicenter. You’ve got extreme talent across our universities. If the capital was coming from the UK, I think it could happen here.

Murphy: It’s funny, on the risk capital thing, I always think back to Enterprise Ireland, a state support body, and they measure success by the number of companies still in business five years after they fund them. But what do you have to do at the core? Can you introduce a cultural change?

The UK Has a De-Growth Cultural Problem

Clifford: I mean, I think it’s a very deep-seated cultural problem. I’ve thought recently, quite often, that if I was a benevolent, patriotic billionaire—sadly, I’m not yet. I mean, I’m not a billionaire, to be clear.

Murphy: You’re on Patreon, you’re not yet paid, you know.

Clifford: Actually, one thing you could do is just fund a lot more cultural artifacts that actually elevate the role of scientists, technologists, engineers, entrepreneurs. When was the last time you saw a movie or TV series where the business person was portrayed positively?

Murphy: Yeah, well, I should be curious. What are the cultural artifacts from you guys growing up that you think led you to this path? I think a lot of people that wanted to work in politics watch The West Wing. Was there something that you saw that took you down this path?

Clifford: For me, probably the closest was just reading a lot of sci-fi as a teenager and sort of having my imagination captured by that. Think of the role that Adolescence, that film series, played in UK public life last year. Now obviously there are all sorts of reasons for that. But imagine if we had a Netflix series about someone doing...

Hogarth: A documentary about Demis has been viewed 300 million times on YouTube. So yeah, it seems to be sort of happening in another way.

Clifford: I think there’s something interesting about how the idea of growth is just not very appealing to people. I’m not saying they’re making a mistake. I think it’s just a very abstract, can sound quite sterile, idea. And there is something about it, we just need a cultural movement for growth and what it actually means, and its actual real-world consequences and what it means for people’s lives and their families and their way of life. How do we make tangible the country that we actually want to see? It isn’t about rich people getting rich, or it can’t be about rich people getting richer. It’s got to be about people’s lives. And I just don’t think we’ve done a good job across any media, really, telling that story.

Hogarth: I think there’s also sort of a neutrality around growth and technology that I think is maybe not being that helpful. You’re sort of like, growth of what exactly? What does good growth look like? And then I think the same in terms of this sort of slightly lazy and reductive “I’m a techno-optimist” stuff. To me it’s like, well, which technologies are you optimistic about? All of them? Gain-of-function engineering in viruses?

Clifford: Thinking about that time we went for that dinner and everyone had to go around the table and say if they were a boomer or a doomer. It’s just quite...

Murphy: Was it majority boomer?

Hogarth: Yeah! And I think being an optimist is generally a great mindset. But I think that I do make a valid judgment around, I think fusion, if done right, could just be so amazing. Clean baseload, cheap energy. I think that’s a better technology than some others that are having more capital poured into them. And so I think part of why the public hasn’t been brought along on this stuff is they are clear-eyed about the fact that some of this stuff isn’t actually that useful.

Growth ≠ Good

Murphy: I know you’ve talked about the degrowth movement before. How do we bring people to this much more positive but real kind of pathway to actually building a better world?

Clifford: Yeah. I mean, I do agree it’s about storytelling, but I think some of it is about reality, isn’t it? I mean, I think the hard thing is that growth does have a pattern. And just like I think there are good technologies, and yeah, it would be crazy to say all technologies are good. I think gain-of-function research hasn’t done the world any favors, as far as I can tell.

I do think we should be honest that the growth that we have had hasn’t benefited a lot of people. And it’s worth actually just staring that in the face and saying: what are the lives that we actually want people to be able to lead? And then how do we get them there? What is real freedom in people’s lives? Real flourishing?

But it strikes me that what we haven’t done a good job of is taking the legitimate concerns of people who are sort of degrowth-adjacent and actually pointing to the ways in which a pro-tech, pro-growth mindset tells the story differently. So actually, I totally understand people who look at environmental degradation and say, wow, if this is what growth means, I don’t want it.

Now, the reality is actually in the UK, one of the great successes of the UK over the last 30 years has been massively reducing our carbon intensity per pound of GDP. That’s great. We haven’t really told that story as a triumph of technology—actually, a triumph of capitalism. It’s both of those things. But if we don’t tell that story, then of course, if you look around and see the symptoms of that, then I think we just got to meet people where they are a bit on this.

And I think there’s a temptation when something seems so obviously good—it’s like the transformation in living standards that’s happened globally over the last 50 years—to be like, “Well, the people on the other side of the table are either, you know, stupid or evil.” And I think actually it’s our job to tell the stories about why that’s not the case.

Hogarth: I think there’s an element of almost a missing political philosophy to frame a lot more of this. I found it very helpful reading the David Deutsch books, because I thought the point around sort of fundamentally the real thing we want more of is knowledge, that’s the actual thing where the more of it the better in many ways.

And the definition that some economists pull on technology is doing more with less. But we can then look at different technologies and say, well, are they actually doing more with less, or is it just basically just quite a sort of weak technology? The beauty of some of the most advanced technologies is how much more we can do with a very small amount of material.

A lot of the sort of “philosophy around technology” comes from people talking their book, people who aren’t thinking that carefully about it. And I think that means we just don’t have great frameworks to be working with.

Clifford: I think one thing that I feel quite strongly about, the more time I spend sort of close to public life, is that actually I think the public have really good instincts on a lot of this stuff. Yeah, definitely. When you spend time in focus groups or when you encounter people outside the tech bubble that we’re all definitely part of, actually, I think people from first principles, or actually get to good places.

And, to say something maybe slightly controversial, I think a lot of American discourse about Europe is sort of looking at things like the Online Safety Act. Now, I have no—I don’t know anything like enough about the actual act and what the rules are. But it’s funny how actually I think the public have good instincts about what they do and don’t want to see online.

And the whole ethical justification for capitalism—I’m a pretty ardent capitalist—is that you’re creating value, you’re creating more value than you’re capturing. But actually, there’s quite a lot of evidence for some kinds of online activity that we haven’t properly measured the externalities, the negative externalities of that activity. And it isn’t creating more value than it’s captured. And actually, why should we celebrate it just because someone has done a really good job of value capture? Why should we pretend that it’s value creation?

And when, like, moms and dads worry about what their kids are seeing on their screens, that’s not some weird anti-capitalist, degrowth thing. That’s a really legitimate, strong instinct that something’s not right here. And they’re probably right.

And I think sometimes it doesn’t suit people in our industry to be really honest about: a lot of the time for the VC, for the investor, if you have an unpriced externality, that’s great for you, but it isn’t actually good for society. And I think we need to be honest about that.

Hogarth: We’ve also just, there’s always a reactionary force in political philosophy. And I feel like in some ways, the reactionary force of the last couple of decades feels like it’s almost been just trying to sort of justify everything? If the market says it, if the market prices it, it’s good. If people download it, it’s good. It doesn’t really attempt to put any value judgment on the vector.

And I think there’s a lot of good in that. It’s a very liberty-enhancing position in that it respects the individual and their choices. But I think it ignores the bigger power structures the individuals have to navigate around. It’s not like we have a large number of social networks with your friends on them to choose from. So as soon as you have monopolies, as soon as you have concentration of power, you have to ask the question of: to what extent are we even really getting a choice?

Prediction Markets as Gambling Companies

Murphy: I think one of the funny things about the US right now is the two youngest self-made billionaires both run gambling companies.

Hogarth: You mean the prediction markets?

Murphy: Yeah.

Hogarth: But I think that’s actually a perfect example of: is it a good technology or not? I would argue that it probably is increasing our knowledge because it is acting as a useful market mechanism for aggregating certain things that are currently inscrutable. I can make a case that it’s actually a positive technology.

I think the question again is: within it, you sort of have to scrutinize how it is being used. Again, we don’t even really have a very good framework to talk about whether these products are good or not, right? You make a joke about the gambling technologies—they kind of are, but they’re also novel markets. And I just think, where is the debate actually happening about whether this is good for society, and what we want to amplify?

Clifford: We’ve all been in pitches where the founder opens with this thing where it’s like, “We’re going to change civilization.” I mean, the famous example is WeWork, right? You know, civilizational connectivity. It’s a co-working space. And I think I’ve been fascinated by prediction markets for 20 years. I think they’re, in theory, one of the most interesting civilizational technologies, genuinely. But it’s like, cool, well, how many goals will be scored? Yeah. And maybe you need that to enable the other thing. But I think it is weird that almost—I feel myself having this conversation like there’s a bunch of Silicon Valley tech Twitter that would even observe the thing where immediately be like, well, it’s just anti-tech, anti-capitalist even to have the conversation.

And this is kind of the weird thing: all these justifications of capitalism require you to be able to price things. And I think the debate is: are we pricing the downsides as well as the upsides of all these things?

Hogarth: And I feel like the debate on, say, prediction markets would collapse to this super-sharp anti-tech critique and this “if people are doing it, it’s good.” That’ll be the sophistication of the debate.

Murphy: The government is theoretically expressing the will of the people. And if the people want these services and are voting with their feet, the capitalist view is: give it to them.

Hogarth: But it is a bit vox populi, vox dei, as long as it’s not my thing. What happens if a state decides to ban a technology, like the social media bans in Australia? Is that going to be perceived as great democratic action?

Political Leaders Should Not Be Neutral About the Good Life

Clifford: I also think there’s something about going back to this question of competition between countries and Ian’s point about what it would take for the UK to win. One of the bits I really agree with in what he said is partly about leaning into: why live in the UK?

And I think there is this really difficult but important question about how much modern nation-states should—we kind of lean into a way of life. And I don’t know, actually, if we want states to be totally neutral. I think we’ve become very suspicious, rightly because of the horrific things that happened in the 20th century, about top-down imposition of a way of life. But I think there’s nothing wrong with political leaders not being neutral about what a good life is.

And gambling addiction is not a good life. And finding a way to express that that’s compatible with—I think one thing China has done, it’s interesting how they’ve been very non-neutral about what kind of tech they want. I think the story of DeepSeek is quite an interesting one, right? We’re actually not that keen on high-frequency trading. We’d like you to do AI. I’m caricaturing, but there’s a lot of that in recent Chinese tech history.

UK and Europe: Geography as Destiny

Murphy: To bring it back to thinking about the UK, thinking about Europe. What do you think the relationship between the UK and Europe needs to look like for this next era?

Clifford: Yeah, nice easy question.

Murphy: Nice easy question. You’re investing all across the continent. We’re so interconnected in so many different ways. How does that relationship continue to strengthen even if you assume the current paradigm doesn’t change?

Hogarth: I think that there is an element to which geography can be sort of destiny in the sense of there’s a company that we’ve invested in that is doing sort of synthetic natural gas. So they take carbon out of the atmosphere, combine it with cheap solar, and produce hydrocarbons that can then be fed into the gas grid. And the gas grid stretches from the solar in Spain to the energy needs of German industry. And that’s an infrastructure under the surface of Europe that exists, that connects us all together.

So I think some of this will just be a function of geography, of cables, of pipelines, of shared borders and defense responsibilities, I guess. I think there’s a bottom-up bit, which I just feel that there is a sense of being a European that is a thing that seems to lead to bridges emerging quite organically around startup opportunities. In the same way, there’s a natural affinity for English-speaking countries. All these, us and in the US and Australia and Canada.

I think the bit that European leaders should do more of is sort of thinking: if the EU didn’t exist today and we weren’t Jean Monnet and the iron and coal agreements and post-World War II and all the horrors that were trying to be mitigated—if we just started fresh today, what would be the first thing you’d build, what’s the second thing you’d build?

And I like seeing things like Trinity House. So that’s an agreement between Germany and the UK to share coordination around novel defense technologies. I think that sort of thing is the kind of bilateral, trilateral stuff we should do more of in Europe. And I think it will lead to showing us ways to move outside of the large bureaucracy that is sort of the EU.

The Next Pendulum Swings for Europe

Murphy: It’s funny you say thinking about defense. This is one thing that when, say, Torsten started Helsing four years ago, people were like, this is crazy. And how quickly the pendulum swings in another direction. That pendulum swing was something that someone like Torsten saw coming. Do you see other pendulum swings in motion today? One day European VCs were all doing software companies and now everyone is like, we love drones. Are there areas like that where you can see that coming on the near horizon?

Hogarth: I mean, some that we are high-conviction on are fusion, AI for materials science, photonic chip networks—anything to do with moving things into the light domain—general-purpose robotics, hypersonics. Yeah, those are probably some of the big ones. These are all fully open spaces in many ways where you can’t point at the defining company yet.

Clifford: Look at all our alliances across the supply chain and say: where is there a level of dependence that no longer feels appropriate given geopolitical realities? I think there’s going to be a lot of opportunity in that.

Murphy: There are people actually wanting to just take that risk off the table.

Clifford: Yeah, absolutely. And actually, I think this is where the UK-Europe thing is really interesting. And I think there can be a lot of mutual benefit in having European supply chains that include the UK in certain strategic technologies.

Murphy: Well guys, thank you so much. It was a really great conversation. Hopefully I’ll see you guys soon.

Clifford: Thanks so much.

Hogarth: Thanks a lot.