The Nobel Prize in Economics 2025 recognized research showing that long-term growth depends on a relentless cycle of innovation replacing the old and creating the new. In a world marked by uncertainty, fragmentation and technological disruption, this insight feels more relevant than ever.
Can the principles of creative renewal be turned into practical strategies for growth?
At Davos 2026, Nobel laureates Philippe Aghion and Peter Howitt argued that long-run growth is inseparable from “creative destruction”: sustained technological progress that makes old technologies, firms, and skills obsolete while enabling new ones. The economic tension is political as much as technical: winners benefit from higher productivity and variety, while losers “will try to put obstacles in the way,” making transition support and institutional legitimacy essential.
Aghion framed a core contradiction in innovation-driven capitalism: society must allow innovators to earn rents to motivate risk-taking, yet prevent incumbents from using those rents to block the next wave. The solution is an ecosystem combining venture finance, tolerance for failure, and modernized competition policy that focuses less on static market share and more on “future entry, future innovation,” including data access.
Both warned that policy has lagged technology. The IT boom lifted growth, then superstar firms and weak antitrust contributed to a slowdown; AI could repeat the pattern unless institutions adapt. Yet Howitt noted America’s venture capital system can offset incumbent power, enabling “young companies” to challenge giants.
On human capital, they urged deep foundations and creativity: “the school is the place where you learn to learn,” emphasizing skills complementary to AI. Optimism remains conditional: technology is a “horse,” and outcomes “depend on the policies and institutions.”
Hello everyone. Good morning and welcome to one of the first sessions here at the Annual Meeting 2026. I'm. I'm a managing director at the World Economic Forum, and absolutely delighted to be with you and to be with, two of the three Nobel Prize winners of last year's economics prize. It's going to be a fascinating conversation. We have really two of the top minds who, are have changed how we think about how economies grow, why economies grow, and why some don't. Felipe Aguilar and Peter Howitt have spent their careers asking this simple question where does growth come from? And what they found is perhaps uncomfortable. For growth to happen, some firms have to die. New ones have to grow. Growth is messy. It's not simple. And I think we may be living through one of the phases at the current moment where that question is front and center. Their work explains why Silicon Valley exists. Their work tells us why some countries race ahead. Their work also tells us why some countries don't and where progress remains stalled. Peter is the professor emeritus at Brown University, and Philippe Teaches at Insead at the London School of Economics and at the College de France. Together they've advised governments, they've shaped policy. And of course, in 2025, they won the Nobel Prize in economics. Welcome to Peter Howitt and Philippe again. Round of applause.
Thank you.
Thank you so much. This is meant to be a three part session. So I'm going to ask some broader questions in the beginning. We're then going to do a quick lightning round and go very quickly and hopefully get sort of single word answers, which I know is going to be very difficult. And then the third element, we're going to open it up to Q&A from this audience when we do get to that part, because this is a live stream session, please do wait for the microphone so that we can ensure that you're being picked up by our online audience. Okay. So let's start with the basics. Asking economists to explain creative destruction is incredibly interesting. Because sometimes for some people, the word creative and economists don't quite go together. And on a serious note, you've obviously built your careers on this entire concept of creative destruction. What does that actually mean? Should we embrace it rather than fight it? And why is it relevant today? So that's three questions in one. I'll leave it to you to decide which one of you would like to come in first.
Why don't you go, Peter? Why don't you start? Well, okay. Well, we've known for a long time that in order to sustain growth in the long run economic growth, you need technological progress in the short run. There are lots of measures that you can do to make the economy grow faster by stimulating demand, by removing various inefficiencies from regulation and taxes and so on. But there's a limit to how much output you can get with those measures. With a given technological framework, you need sustained technological progress and new technologies. Inevitably, render previous technologies obsolete. And that creates a conflict between those whose fortunes are enhanced by the new technologies, and not just the innovators themselves, but those who would be producing goods that are complementary to the new, to the new goods and, and to the many consumers who would ultimately benefit from having, a broader variety of goods at lower prices. But there are also losers. There are the people whose, whose factories aren't going to be running, as, as much as before because their goods are being replaced by the new ones. And there are people whose human capital is specifically tied to the old technology and not as valuable with the new ones. And they will try to oppose the the new technologies, they will try to put obstacles in the way. And, this, this very fact helps to explain, for example, why the Industrial Revolution started in, in England instead of in other countries that were going along similar paths, but where guilds were stronger and not and more supported by governments and able to oppose the new machinery that was displacing textile workers, for example. So wherever you whenever you have a new technology coming about, especially a, a mass of general purpose technology such as artificial intelligence that permeates the economy and revolutionizes the way things are done in every sector of the economy, there's going to be a lot of creative destruction. And, the fact is, however, that, these new technologies don't just don't just destroy jobs, they create new jobs and they enhance the productivity of a lot of workers. And, in, in the long run, of course, anybody who loses from these technologies, is dead. Just to paraphrase a saying of Keynes, when the power loom came about, it devastated the fortunes of the handloom weavers who had been very well paid, highly skilled craftsmen, and who are now rendered, who are now now in the position of having to perhaps sell a place mats door to door to eke out a living. But it's hard to imagine anybody nowadays who's life would be better off materially if the handloom, if the power loom had never been invented. And the problem, of course, is making the transition, and, that's something where all of society, I think, has to help, mainly just out of basic considerations of, of fairness and equity, but also because, if the those who win are too small and concentrated a group, the losers may find ways to block technical progress, as they have in many societies in the past.
Thank you. Philippe, your view on creative destruction and whether we should embrace it or fight it.
So I will build on what Peter just very well explained. So our our growth model is a model where growth is driven by the fact that you have constantly new innovators, new talents coming in, entering the market. They challenge yesterday's innovators. They enter and innovate because they they think they will get some runs from innovating, of course. And we want to let them get those runs and grow if they innovate. The problem, of course, is once they've grown, they may be tempted to use their runs as well explained to prevent subsequent waves of innovators. So you see, at the basis of the of this paradigm, there is a contradiction. On the one hand you need to have rents. You need you need to tell people who innovate, you will get runs, you will be able to grow. But on the other hand, you have to make sure they won't use their rents exposed to prevent subsequent innovation. So you want a system where new talents can come in, can grow, can develop, but without preventing subsequent cohorts. So you want a framework, an ecosystem where you encourage risk taking failure. For example, you know, countries that make breakthrough innovations are countries where you encourage failure. You make you have long term research finance, you have venture capital, institutional investors at all stages of the innovation process. They encourage short term. They say if you fail in the short run, it's no big deal. But take risk and make breakthrough innovation. You want an ecosystem that encourages, you know, at all stages, from basic research to application risk taking. Okay. At the same time, government policy is important for competition policy, you see, to make sure that the yesterday's innovators will not prevent subsequent innovation. There is something called competition policy that's very important. You need to enforce this competition policy. The problem is that incumbents may collude with governments to prevent the implementation of this competition policy. That's where civil society is very important, because civil society puts checks and balances. You know, the media, the the voters, the, the unions, whatever they are there to make sure that to minimize the scope for collusion, for crony capitalism, for collusion between incumbents interests and governments, so that you can have new talents coming in. And that's a bit the the this triangle firms innovate. You have to let them innovate and grow. Governments come in with competition policy also labor market policy. Peter was telling about job destruction creation. You need institutions to deal with that. I am very Danish. I believe very much in the Flexicurity model, which maybe we'll talk about it later. And, and I believe in the role of civil society to make sure that the government is delivering, that the government is not bought by, you know, there are some countries where you see a head of big firms in the in the governments, you know, in the with the president, you have to make sure that, you know, you minimize the scope for this collusion between vested interest and government. And that's where civil society is so important.
Thank you. It's a moment of transformation. I think, even in just the couple of hours that we've been here in Davos, everybody is talking about how much is changing, how much is transforming. Are we in the midst of a period of very large scale creative destruction and in particular, with some of the very large technology companies, where a lot of the current innovation and the gains of that innovation are concentrated. I mean, do you see that as being creative destruction, or do you see that as being the roadblocks to further creative destruction?
The IT revolution was interesting in that respect because, you know, between 95 to 2005, in the US, growth, soared up. Okay. And it was very much carried by the IT revolution. And the IT revolution is absolutely associated with the names of your rising superstar companies Amazon, Google, Microsoft. They they knew how to harness the power of it better than other firms. And they were able to grow because they were better, but also because they could do merger and acquisition without any limits. And what happened is that initially they boosted growth in the US. But what happened is they became tentacular and they ended up discouraging entry of new firms. And then you had a growth decline in the US. So the problem is that it's true that you have this, you know, with these revolutions, usually there are some people are big, big winners. They grow. On the other hand, it's good that you let them grow. I said before that, you know, we should not prevent a priori firms growth. But the problem is that competition policy in the US did not fully adapt. And I think we have the similar problem in Europe did not adapt sufficiently fast to the IT revolution. They should have been, you know, when deciding whether or not to allow a merger and acquisition, you should not just look at market share, you should look at whether a merger will inhibit future entry, future innovation. You should be much more demanding on data sharing. So the competition policy did not adapt sufficiently fast to the revolution. And as a result, following this high growth period, you had a growth decline period. And the problem with AI is that if you look at the upstream segments of the AI value chain, you have those same large firms in the cloud is dominated by Amazon, Google, Microsoft. In the market for graphics processors, you have GPU as the unique. So it's important to you to make sure that you adapt competition policy to the to the revolution. My view is that prosperity is a joint result of technology and institutions. I'm quite optimistic on the technology, but the technology is like a horse. You see, the horse can, you know, put you to the wall or lead you where you want. And you have to adapt your policies and institutions. What's very slow often is to adapt our, for example, competition policy to make sure that we don't AI will not produce the same type of outcome as we had with, with, it.
Yeah. Peter.
I agree with everything Philippe has said. I would just like to add two points. One, one is that, it's true that there was this burst of growth starting at about 95, in the US and, and in Europe, and it is, very correctly attributed to the IT revolution. But there was a long period before that, after, the personal computer had been put in after the the internet was starting to be widely used when, you know, Bob Solow at MIT was famous for having said you can see the computer everywhere except in the productivity statistics. And this is typical of general purpose technologies. When they first came in, it was true of electrification that, that that, when, when firms started, electrifying manufacturing and when households started, to, to electrify their houses, you didn't see great growth, for, for many years, because it required further downstream innovations to realize the full potential of these new technologies. And, and, of course, innovation is an uncertain process. You just don't know where they're going to come, exactly what their nature is going to be. And so I remember very much in the, in the late 80s and early 90s, when I'd go to the faculty club and talk with my colleagues, we'd be discussing the latest article. We used to be discussing the latest article in Econometrica or the American Economic Review, and now we were talking about how to, space your paragraphs in word perfect. And, you know, this this was clearly not an optimal use of our human capital, but, but it's what we were all doing. We were fumbling around trying to find out what's the best use of this new technology. And ultimately, the productivity gains came, and then for, for reasons that Philippe has explained, they started, well, I think they started to, to taper off. But the second point I wanted to make was that, yes, competition policy is extremely important, but no country does everything right if you do a lot of other things right, you can overcome these deficiencies. And I think what's interesting in America is that it's true that these very large tech companies were very successful in suppressing innovations, by, by startups, sometimes encouraging them, but then engaging in preemptive mergers to make sure that these technologies didn't go too far or in the wrong direction to threaten their own interests, putting up patent thickets or engaging in regulatory capture, doing a lot of things that incumbents can do to to block outsiders. But the US also has this incredible venture capital system. And and so what has happened with the AI revolution is that it hasn't been dominated by Google and Amazon and the other giant corporations. Instead, you have, you know, recent startups, you've got OpenAI, you've got, all sorts of companies that have have raised hundreds of billions of dollars that are are young. They're not small companies. They can't be to exploit this technology, but they're young companies. And, and that that's, you know, that I think is offsetting the problem of competition for the moment quite a bit.
Okay.
Thank you. So then let's get even more specific than that. We see billions pouring into AI, into, semiconductors, into robotics, into adjacent industries related to energy, for example. But a lot is yes, there might be younger, but they are also giants, as you've just pointed out. So where does that fit with this idea of creative destruction? Is the scale itself keeping challengers out in the future?
I wanted to just on creative destruction. It's interesting. It's true that in the US you have a bias toward large incumbents. Yet, as Peter Royal explained, the ecosystem allows for newcomers. For example, Yann LeCun is leaving meta. He's coming back to Europe to start something. He believes he will go beyond LLM now. He believes that he will make LLM obsolete and go beyond and can start something new. Now that's encouraging and it's happening in Europe. Big hope for Europe. Let's keep Gianluca in Europe. Okay. The problem in Europe is very interesting. We, we are behind the US. And that's in terms of despite the, you know, the fact you could improve the competition policy in the US, our innovation ecosystem in Europe is inferior to that in the US, and Europe is in technological decline compared to us and now to China. And we have to do something about it. And that's the the Draghi report is all about that. And in particular it's interesting you see us there in high tech breakthrough Europe. We are a lot incremental middle tech, not enough. We don't move in. And what's very interesting, the breakthrough innovations worldwide cytologic European research, even though we are our research is underfunded. We breakthrough innovation worldwide European papers. But but the research in Europe, the breakthrough innovation doesn't take place sufficiently in Europe. And if you look at the leading patents, the leading innovators in 2000 versus nowadays in the US, they are not the same. So you had creative destruction there. There are large companies. They are not the same large companies in Europe. They are the same. The top patents in Europe 25 years ago are the same and they are mainly in mid tech incremental. And there are large companies. So you see even at that level you have more creative disruption and more breakthrough innovation in the US than you have in Europe. And that's the big problem in Europe. What can we do to wake up, and not lose to China and the US because we are losing to both ways now.
So we've heard a.
US perspective on this. We've heard a European perspective on this. Any other parts of the world where you'd want to provide some commentary?
Well, I think one of the interesting things, has been the continual, rise of China in technology, for, for many years, China was one of a number of, of Asian countries that were, were, we used to refer to them as the tigers that were, were that had been shortly after World War two, among the very poor countries and, and had these miraculous growth rates that took place, largely as a result of engaging in a lot of international trade that facilitated the, the the adoption of foreign technologies. And, and these, these, these countries grew very rapidly, grew up to living standards that were similar to those in Europe and North America. And many of them have reached a sort of a plateau of fallen into the the so-called middle income trap. And, but China seems to be an exception to that. And, and if I had been asked to pick which of these countries is going to be an exception 20 years ago, I think China would have been the last country that I would have referred to, because there was a lot of evidence, that that people had put together, until fairly recently, that, that democracy is really an essential ingredient to, to becoming a technology leader and to sustaining growth through breakthrough leading edge technologies. And that's largely because you need a lot of openness. You need you need to have a society that's willing to, to allow people to try something unconventional, new that, that, that, that, that, that goes against the grain of the status quo and so on. That doesn't, you know, sit well with a lot of non-democratic regimes, but somehow or other, it seems that China has managed to to break the link between political freedom and economic freedom. And, I find that very surprising. They have not just caught up. They are now leaders in electric vehicles and solar panels, batteries, a lot of other a lot of areas. And I expect in a few years there'll be leaders in many other areas. And, exactly how this has happened. I'm not sure, but I do believe that they're making use of, what a lot of other countries have done, which is to allow a lot of economic competition and, to allow new firms to, to start up and, and and perhaps to fail, but, but, those new firms are, have a good prospect of making lots of profits if they do succeed and, and are not suppressed. There's, there's, there's a, there's a widespread data sharing, which is really very important. And stands in contrast to what happens in the United States, for example. There are there are a number of reasons. I think we're just beginning to, to understand why this is taking place, but to me is very surprising.
I wanted to add something. It's true that, you know, the middle income trap is the fact that you have some countries they know they have, they catch up, they manage to catch up. They have institutions that are good for catching up. You know, technology transfers, factorial factorial allocation. But they, they don't always move to institutions that are good for, frontier innovation, for example, competition, for example, Korea or other countries. During the catching up phase, you have the emergence of conglomerates that of course didn't want to move towards more competition. The trouble is in Korea, the keiretsu in Japan. And that stops the, you see, the that prevents them from moving from imitation based growth to innovation based growth. And, it's true. It's interesting that China the jury is out. I think they are they are frontier in some domains. I don't know if they will do innovations, you know, will they invent the equivalent of the new wave that I don't know yet. The jury is out. But, you know, the, that's another but, you have this, middle income trap syndrome. It's true that in China, one element which is interesting, they have some form of competition, even though it doesn't work like we do, and they have industrial policy. And when if you look at the world innovators that are US and China in both you have competition policy, some some form of competition and industrial policy. Again, coming back to Europe, the pitfall in Europe, in the name of competition policy, we precluded any form of sectoral state aid. We were anti industrial policy. The and Krueger view of competition policy. If you want competition policy, you should preclude any form. But we know that DARPA is a way to reconcile industrial policy and competition policy. And in China they found their own ways to also do it. And we need to have our own DARPA in Europe. We need in Europe as well, in defense, but not only in energy transition, in biotech to in AI, to find ways to, to to show that we can have to push industrial policy, which is competition friendly. And that's what we are missing in Europe compared with maybe China and of course, the US.
Yeah.
Thank you. I have one more broad question before we get to that rapid fire round and then open it up to Q&A. You both said that human capital is incredibly important. What does that look like to you in the age of AI, when it's incredibly unclear where that human capital investment should take place?
Can I take maybe on what I will start? And then I let my my feeling is that we should AI will increasingly substitute for routine cognitive tasks. Okay, so how can we like search, coding, diagnostics and things? How can we adapt our education system? My own view on education is to say first we should emphasize basic knowledge, basic, you know, math, scientific reasoning, reading. I would I would preclude, you know, iPads and iPhones at school. You need to you need to read, learn to read, learn to write, learn to calculate on your own. You need to learn to learn. The school is the place where you learn to learn, where you learn to be adaptable because you've been solving problems yourself. So I think that's one thing is really basic knowledge, deep foundations. Second thing is that education should emphasize skills that are complementary to AI. Maybe both at school and in firms. Problem solving, critical thinking, creativity, social skills. I believe very much in soft skills like working with others, leading, you know, convincing other people, ethical responsibility. Those things are, you know, should also be taught partly at school, but also in firms. Firms, I think, have a responsibility when they have their employees to develop soft skills with their employees to and have the view that they should be there to stay, even though, of course, they will be job creation, job destruction. But I think there is a responsibility of the education system first and then within firms to emphasize those things that are complementary to AI. And that's my Peter. I'll let you.
Thank you. Peter.
Well, I agree with all of that. I to me, the, the one of the things that distinguishes, countries that have fallen into the middle income trap and those those that haven't is the emphasis on creativity in, in education at all levels that, it's very important if you're going to have have a country with a lot of leading edge innovators that people grow up not thinking that there is a body of knowledge out there that is to be learned, but not to be challenged. And that's not the attitude of the educational system in a lot of countries. And I know it's not an it's it's it's easier to talk about fixing that than it is to actually do it. Because that attitude in schools in many countries reflects the general social attitudes of, of, of, of conservatism and, and not challenging authority. But, you know, it's always amazed me, for example, that American students do so badly in international test scores. And when I get them as Ph.D. students, they are so good at writing PhD thesis. And the many students from other countries in the world who are brilliant at ace their courses. When it comes time to, to write a dissertation, start to, to stumble and, and are really, really find difficulty in, in branching out and doing something that's radically different. And, and I think that's something that, perhaps requires something more than educational change, but it certainly does require necessarily educational change.
Okay.
Thank you. Now we're going to do a very quick, lightning round. I think you were told one word at most in your response. I know that's going to be very difficult. Let's say one phrase at most. But let's keep it less than a sentence if we can. All right. So. Have you guys picked an order of who's going to talk first? Okay, well, I'm going to come to you, Peter, every time. First get that gives you a little bit longer to think. All right.
That's right.
All right. So our today's tech monopolies net positive or negative for long run innovation.
I'd say positive.
Okay. Philip.
It's it's a cautious positive.
Yeah. Okay.
You've already switched to the phrase two. Will AI create more inequality than it solves?
We don't know.
My answer. It depends on the policies and institutions. It depends on us. Again, it's not AI per se. It's where where how you do AI, education, security, competition or you you don't do that. You see what I mean? So AI with those guys I think can promote social mobility. Without those guys it will, I think, exacerbate inequality.
Okay.
You have used up your quota.
I'm so sorry.
All right. Number three, should antitrust enforcers be more aggressive right now?
I'm not sure about more aggressive, but they should be more focused on, using antitrust policy to encourage innovation rather than just to keep prices low.
Similar. Don't move from obsession with market share to obsession with new entry, new innovation from static to dynamic.
Okay, so.
Antitrust policy has to change for industrial policies come back evidence based or wishful thinking?
Very evidence based. United States. Two great productivity booms have been in agriculture in the early to mid 20th century and then in the IT revolution. Both have been led by the government, the first by the Agriculture Department and the second by the Defense Department.
Yeah, that's more than one. That's good. Yeah. I mean so my very quickly I believe we can reconcile industrial policy and competition policy DARPA in US and China. The Chinese have another way and we have to do European DARPA.
Okay.
Five universal basic income. Is it necessary or is it a distraction?
I think it's a distraction. We need to focus our aid on people who are displaced by new technologies, not to waste it on everybody.
I believe that you need to provide security. I'm very Danish. I believe in basic. You know, you need to have dignity and, but encourage people to look for new jobs. So you need the flexicurity system is my preferred.
Okay. Number six, climate and growth. Is it complementary or competing?
I think it should be complementary. And it can be directed that way. In fact, we need new technologies to deal with climate problem.
I believe that, you know, the way green innovation in all sense, mitigation, adaptation or amelioration, green innovation is the way out. And that requires a mixture of carbon pricing and green industrial policy. And we need both. Carbon pricing alone will not do it. We need both.
Great. Thank you so much. Thank you for that. We are now going to open up to questions. If you could take a microphone, briefly say your name and organization and a brief question, and then we'll get to Peter and Philippe.
Thank you. Sadiq. My name is Nonkululeko Mbezi from South Africa, and I am stalking Philip because he ran away before answering my question the last time around. So now you can't run away.
To escape your question in the previous session? No, no, that's.
So to both of you. But, starting with you, please, if I may, if you draw an arc through history from Schumpeter, 1942 to 2025 Nobel Prize, what has fundamentally changed in the way that we understand creative destruction and its impacts and what has remained the same? So, in other words, what do we know now that he didn't appreciate then?
The trumpeter himself? You mean he doesn't appreciate? You know, I it's very hard. We we wrote we put creative destruction at the heart of a growth model. So we build a growth paradigm. When I was a student, the leading growth paradigm was solo, which was a beautiful model. You know, where growth is based on capital accumulation. And yet that under reasonable assumptions of decreasing returns to capital accumulation, solo would tell you that long run growth can only come from technical progress. You will not tell you where technical progress comes from. And that's what we call the solo residual. And so what we did with Peter is to say let's from scratch, write a growth model. There was no such model that would embody the notion of creative destruction. But then, when you do that, you realize that creative destruction interacts with many aspects of economic life. You see, you, you, you, you you got, for example, on competition and innovation, for example, you realize that there are various effects, like there is, you know, escape, competition effect, to innovate, to escape competition, or you are discouraged because there is too much competition that kills your rants when one effect dominates the other. If you don't write a model, you cannot tell when is one effect dominating the other effect and the middle income trap. If you don't write a model, you don't get the middle income trap you mean, or the secular stagnation. You don't know where the effect of, you know, firms growing with the rents will be dominated by the firms that the large firms preventing new firms. If you don't write a model, you can't you can't say much. You don't have the glasses with which to look at the world. And the world is one where you have large firms, small firms, incumbents, entrance leaders, followers, how those interact, what is the macro result of that? And there was no model that would allow you to have the glasses to look at the data through those glasses. And that's what we tried to do.
Peter.
Well, I think the, to my mind, the main thing that that we did that I think would have surprised Schumpeter is to find that when we did look at the data, with the help of the great, econometrics team at UCLA led by Richard Blundell, taking a look across different, firms and different industries in the UK. And people have replicated this in many other countries. They found that, that the relationship between competition and, and innovation was this, this inverted U-shaped thing that if you have too little competition, you get you get you don't get much productivity growth, much innovation in a sector. And, add this up. This applies to countries. You get too much competition. There aren't enough rents to encourage innovation. It's somewhere in the middle. And interestingly, what we found was that most of the firms in the sample and our sample included all of the public listed publicly listed firms in the UK. Looking at them quarterly for many years, we found that most of the firms in the sample were actually on the rising part, where more competition would stimulate productivity, growth and innovation. And, you know, Schumpeter was very against, antitrust policy, thought that we should let the big firms alone, they've been innovating. They're making rents, sure, but that those rents are the payoff to innovation, and that fact still exists. But now we know that it's not nearly as important as the pro-competition effects.
Okay. Thank you. Other questions. Ken.
Hi. Thank you both for your insights and teachings. I'm keen. I'm the CEO of an AI startup called Walkera and an adjunct lecturer at Stanford in Computer science. My my question is you talked earlier about the venture capital community in the US fueling innovation through their investments. Yet it seems to me that behind the scene, if you look at the cap tables of those newcomers, a significant portion still belongs to the incumbents today. So are we experiencing a model where the incumbents are essentially reinventing themselves and rebranding themselves? Am I thinking about this? Right? And what does it mean for an economy that we want to thrive long term when the incumbents are just rebranding themselves?
My hope is that, you know, it often it happens sometimes that you have spin offs that some people like, you know, for example, Yann LeCun is leaving meta. He's doing his own thing. Okay, maybe later on he might be bought back by a large firm. But it's true that it's interesting that to to pursue his new line, he had to leave meta. Because sometimes within large firms, some. I don't want to make any general remark there. You might be too much influenced by, he told me. Also, it was important for him to move away from the Silicon Valley. They were all thinking in the same terms. They were talking the same language. He needed to just do something different and go somewhere else. And so it's a spin off not only from meta, it's a spin off also from Silicon Valley that he needed to develop this new thing. So I think that, you know, that's the thought I had on Peter.
Did you want to comment on that?
Well, just to say that, you know, the financial relations between the different companies that are pursuing AI are too complicated for me to understand. I don't really want to intervene on that question.
All right. Sir.
I am I'm French. I am developing a battery manufacturing in Europe. Philippe, we met, in one of my shareholders event a few weeks ago. My question is, I appreciate your thinking on, destructive creation, but I do see today is that globally, China has been extremely efficient to basically manufacture everything, and it's accelerating. And, usually in the past, the blue collars found job in factories that were manufacturing things. And this is vanishing in the Western world, to say the least. How do you see those evolutions? Because if we follow that natural tendency with AI coming, capturing some of the white collar jobs and all the blue collar jobs being globally transferred to China, and I'm simplifying a bit. This raises a huge question on the social balance or the social, equilibrium of, of most of the historical Western world countries. And I'm happy to hear you, your vision on that, because we don't see yet and I don't see yet what will compensate, those trends and what will bring some hope to part of this, important, society components.
My own view on on I know Europe, you know, we are facing challenges in Europe, but I believe we have soft power. We are democracy and freedom for those who value it, I think I think Europe is the stronghold of democracy and freedom these days. Okay. I think on social models we don't have perfect social models. And I'm more Danish. I would I would like France to be like Denmark. But we are not that bad either. But we have we believe we have a better social model than the US, for example, and maybe even China. On environmental concerns, we think we, we share environmental concerns that maybe other parts of the world don't share. So that gives we have fantastic researchers I mentioned before who can do the next revolution in AI, you see. And so we culture I think we have enormous, you know, assets. And we have to mobilize them to attract people to come and work with us, you know, and we have the only thing is that we have to make sure we regulate, but we don't overregulate because if you overregulate, we discourage entry. But we need some regulations, obviously, but we need the right regulation. So if we create a nice regulatory and fiscal environment on top of those, assets that I was mentioning, I think Europe has a lot of attractive power. And to deal with the labor market, then that brings us back to flexicurity and education. But I think we can deal with those. We can, because again, in those respects, we are ahead of other parts of the world. On knowing how how you make sure that the revolution is socially acceptable, how you deal with job creation and destruction. I think on those things, Europe is ahead, and I think we should harness those those assets that we have.
Okay.
We have one last question, and then we need to move on.
My question maybe my question is more an observation. First of all, I totally agree on the flexicurity and the ability that a key element to encouraging creative destruction. I guess my question is about China and about how the West should respond. Suppose we have this notion which you mentioned. So imitation growth versus integration, innovation growth. The the Chinese are ahead in, EVs and batteries. Absolutely ahead. So why not learn from them? I actually think what we should be doing is encouraging, requiring maybe their foreign direct investment, basically saying, okay, yeah, we will learn from you. If you think about what the US did with Toyota years ago, the US insisted that Toyota, limit its exports to the United States and the rest produced in the United States. It was a very significant transformation of technology innovation in the United States auto industry. So I'm just let's let's imitate China and bring them right in.
Could I can I just add one, one thing which I think that the the thing that most encourages us, a country to imitate foreign technology is competition through international trade. If you put up barriers against the importation of Chinese electric vehicles, what's the pressure on Tesla to become better? They just let themselves be overtaken and it doesn't matter so much to them. The same in batteries. Yeah.
I agree and I want to build on that. I think that, you know, a way to deal with China is to say, well, you know, of course the European markets, for example, are very attractive for China these days. But we say let's make a deal. You want our markets, we want your knowledge, and we need to there are there are obstacles there. Because on our side we say, well, you know Alstom, you know, high speed train. We went to China. We taught them how to build high speed. After two years. They say we can do better high speed train than you do. We don't need you anymore. We don't want to get into this kind of thing. We want long term cooperation. That's our problem. And we want technology transfers to go both ways. As you mentioned, their problem is that they think if they cooperate with us, maybe at some point we say we stop cooperating with you because they are afraid that now we would go with them because there is a the current situation. But suppose things change on the other side of the Atlantic. You might decide to turn your back on us again. And so it's a matter of trust building. They have reasons to, you know, to be doubtful. And we have our own reasons to be, but we have to build up trust and say, market access versus technology transfers. Exactly. Yeah.
Thank you so much. I have one final question for you. We've talked about a lot of challenges, and certainly we will talk about many more challenges to come over this week. What makes you optimistic, Peter?
Well, I think I'm just naturally optimistic. I but I should say that every general purpose technology that has come around so far has led educated, intelligent, informed observers to predict disaster, technological unemployment. And this includes some of the best minds in the history of economics, from David Ricardo through John Maynard Keynes, through even through Paul Samuelson. And they've so far all turned out to be wrong. And, this is no proof. It's just a few examples, but it's a small sample. But it's enough to make me, encouraged.
My own view is that.
Building first, the fact that indeed none of the previous revolution led to the mass unemployment and disaster that was, you know, that people thought that would lead to. But the other thing is that it's the optimism of the researcher. You know, we face difficult problems. We said there must be a way to, you know, to break the ice. There may be a way to solve the problem. And as long as you see possible things you can try, you should be optimistic. For example, Europe. I can see ways in which we could have more integrated markets, better financial ecosystem, more long term research finance. Do that with coalition of the willing. I can see that Germany wants to invest. Britain wants to get back to us. Now, of course, they realize that, you know, and we talk Europe. It embraces UK. I can see, you know, whenever I see those things, that makes me optimistic because I see ways out and I can see that there are some countries that are aware of those things, of those levers and that we can mobilize them. As long as we have that. But it's cautious optimism because it means that we need to put the right policies and institutions. It's not it's not a done deal. It's not a panglossian optimism. It is more a fighting optimism that I have.
Super. Thank you so much. Thank you to our online audience. Thank you to the audience in the room. And most importantly, thank you to Professor Howett and to Professor Aguillon.
Thank you.