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#431925 How the Science of Decision-Making Will ...

Neuroscientist Brie Linkenhoker believes that leaders must be better prepared for future strategic challenges by continually broadening their worldviews.
As the director of Worldview Stanford, Brie and her team produce multimedia content and immersive learning experiences to make academic research and insights accessible and useable by curious leaders. These future-focused topics are designed to help curious leaders understand the forces shaping the future.
Worldview Stanford has tackled such interdisciplinary topics as the power of minds, the science of decision-making, environmental risk and resilience, and trust and power in the age of big data.
We spoke with Brie about why understanding our biases is critical to making better decisions, particularly in a time of increasing change and complexity.

Lisa Kay Solomon: What is Worldview Stanford?
Brie Linkenhoker: Leaders and decision makers are trying to navigate this complex hairball of a planet that we live on and that requires keeping up on a lot of diverse topics across multiple fields of study and research. Universities like Stanford are where that new knowledge is being created, but it’s not getting out and used as readily as we would like, so that’s what we’re working on.
Worldview is designed to expand our individual and collective worldviews about important topics impacting our future. Your worldview is not a static thing, it’s constantly changing. We believe it should be informed by lots of different perspectives, different cultures, by knowledge from different domains and disciplines. This is more important now than ever.
At Worldview, we create learning experiences that are an amalgamation of all of those things.
LKS: One of your marquee programs is the Science of Decision Making. Can you tell us about that course and why it’s important?
BL: We tend to think about decision makers as being people in leadership positions, but every person who works in your organization, every member of your family, every member of the community is a decision maker. You have to decide what to buy, who to partner with, what government regulations to anticipate.
You have to think not just about your own decisions, but you have to anticipate how other people make decisions too. So, when we set out to create the Science of Decision Making, we wanted to help people improve their own decisions and be better able to predict, understand, anticipate the decisions of others.

“I think in another 10 or 15 years, we’re probably going to have really rich models of how we actually make decisions and what’s going on in the brain to support them.”

We realized that the only way to do that was to combine a lot of different perspectives, so we recruited experts from economics, psychology, neuroscience, philosophy, biology, and religion. We also brought in cutting-edge research on artificial intelligence and virtual reality and explored conversations about how technology is changing how we make decisions today and how it might support our decision-making in the future.
There’s no single set of answers. There are as many unanswered questions as there are answered questions.
LKS: One of the other things you explore in this course is the role of biases and heuristics. Can you explain the importance of both in decision-making?
BL: When I was a strategy consultant, executives would ask me, “How do I get rid of the biases in my decision-making or my organization’s decision-making?” And my response would be, “Good luck with that. It isn’t going to happen.”
As human beings we make, probably, thousands of decisions every single day. If we had to be actively thinking about each one of those decisions, we wouldn’t get out of our house in the morning, right?
We have to be able to do a lot of our decision-making essentially on autopilot to free up cognitive resources for more difficult decisions. So, we’ve evolved in the human brain a set of what we understand to be heuristics or rules of thumb.
And heuristics are great in, say, 95 percent of situations. It’s that five percent, or maybe even one percent, that they’re really not so great. That’s when we have to become aware of them because in some situations they can become biases.
For example, it doesn’t matter so much that we’re not aware of our rules of thumb when we’re driving to work or deciding what to make for dinner. But they can become absolutely critical in situations where a member of law enforcement is making an arrest or where you’re making a decision about a strategic investment or even when you’re deciding who to hire.
Let’s take hiring for a moment.
How many years is a hire going to impact your organization? You’re potentially looking at 5, 10, 15, 20 years. Having the right person in a role could change the future of your business entirely. That’s one of those areas where you really need to be aware of your own heuristics and biases—and we all have them. There’s no getting rid of them.
LKS: We seem to be at a time when the boundaries between different disciplines are starting to blend together. How has the advancement of neuroscience help us become better leaders? What do you see happening next?
BL: Heuristics and biases are very topical these days, thanks in part to Michael Lewis’s fantastic book, The Undoing Project, which is the story of the groundbreaking work that Nobel Prize winner Danny Kahneman and Amos Tversky did in the psychology and biases of human decision-making. Their work gave rise to the whole new field of behavioral economics.
In the last 10 to 15 years, neuroeconomics has really taken off. Neuroeconomics is the combination of behavioral economics with neuroscience. In behavioral economics, they use economic games and economic choices that have numbers associated with them and have real-world application.
For example, they ask, “How much would you spend to buy A versus B?” Or, “If I offered you X dollars for this thing that you have, would you take it or would you say no?” So, it’s trying to look at human decision-making in a format that’s easy to understand and quantify within a laboratory setting.
Now you bring neuroscience into that. You can have people doing those same kinds of tasks—making those kinds of semi-real-world decisions—in a brain scanner, and we can now start to understand what’s going on in the brain while people are making decisions. You can ask questions like, “Can I look at the signals in someone’s brain and predict what decision they’re going to make?” That can help us build a model of decision-making.
I think in another 10 or 15 years, we’re probably going to have really rich models of how we actually make decisions and what’s going on in the brain to support them. That’s very exciting for a neuroscientist.
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#431872 AI Uses Titan Supercomputer to Create ...

You don’t have to dig too deeply into the archive of dystopian science fiction to uncover the horror that intelligent machines might unleash. The Matrix and The Terminator are probably the most well-known examples of self-replicating, intelligent machines attempting to enslave or destroy humanity in the process of building a brave new digital world.
The prospect of artificially intelligent machines creating other artificially intelligent machines took a big step forward in 2017. However, we’re far from the runaway technological singularity futurists are predicting by mid-century or earlier, let alone murderous cyborgs or AI avatar assassins.
The first big boost this year came from Google. The tech giant announced it was developing automated machine learning (AutoML), writing algorithms that can do some of the heavy lifting by identifying the right neural networks for a specific job. Now researchers at the Department of Energy’s Oak Ridge National Laboratory (ORNL), using the most powerful supercomputer in the US, have developed an AI system that can generate neural networks as good if not better than any developed by a human in less than a day.
It can take months for the brainiest, best-paid data scientists to develop deep learning software, which sends data through a complex web of mathematical algorithms. The system is modeled after the human brain and known as an artificial neural network. Even Google’s AutoML took weeks to design a superior image recognition system, one of the more standard operations for AI systems today.
Computing Power
Of course, Google Brain project engineers only had access to 800 graphic processing units (GPUs), a type of computer hardware that works especially well for deep learning. Nvidia, which pioneered the development of GPUs, is considered the gold standard in today’s AI hardware architecture. Titan, the supercomputer at ORNL, boasts more than 18,000 GPUs.
The ORNL research team’s algorithm, called MENNDL for Multinode Evolutionary Neural Networks for Deep Learning, isn’t designed to create AI systems that cull cute cat photos from the internet. Instead, MENNDL is a tool for testing and training thousands of potential neural networks to work on unique science problems.
That requires a different approach from the Google and Facebook AI platforms of the world, notes Steven Young, a postdoctoral research associate at ORNL who is on the team that designed MENNDL.
“We’ve discovered that those [neural networks] are very often not the optimal network for a lot of our problems, because our data, while it can be thought of as images, is different,” he explains to Singularity Hub. “These images, and the problems, have very different characteristics from object detection.”
AI for Science
One application of the technology involved a particle physics experiment at the Fermi National Accelerator Laboratory. Fermilab researchers are interested in understanding neutrinos, high-energy subatomic particles that rarely interact with normal matter but could be a key to understanding the early formation of the universe. One Fermilab experiment involves taking a sort of “snapshot” of neutrino interactions.
The team wanted the help of an AI system that could analyze and classify Fermilab’s detector data. MENNDL evaluated 500,000 neural networks in 24 hours. Its final solution proved superior to custom models developed by human scientists.
In another case involving a collaboration with St. Jude Children’s Research Hospital in Memphis, MENNDL improved the error rate of a human-designed algorithm for identifying mitochondria inside 3D electron microscopy images of brain tissue by 30 percent.
“We are able to do better than humans in a fraction of the time at designing networks for these sort of very different datasets that we’re interested in,” Young says.
What makes MENNDL particularly adept is its ability to define the best or most optimal hyperparameters—the key variables—to tackle a particular dataset.
“You don’t always need a big, huge deep network. Sometimes you just need a small network with the right hyperparameters,” Young says.
A Virtual Data Scientist
That’s not dissimilar to the approach of a company called H20.ai, a startup out of Silicon Valley that uses open source machine learning platforms to “democratize” AI. It applies machine learning to create business solutions for Fortune 500 companies, including some of the world’s biggest banks and healthcare companies.
“Our software is more [about] pattern detection, let’s say anti-money laundering or fraud detection or which customer is most likely to churn,” Dr. Arno Candel, chief technology officer at H2O.ai, tells Singularity Hub. “And that kind of insight-generating software is what we call AI here.”
The company’s latest product, Driverless AI, promises to deliver the data scientist equivalent of a chessmaster to its customers (the company claims several such grandmasters in its employ and advisory board). In other words, the system can analyze a raw dataset and, like MENNDL, automatically identify what features should be included in the computer model to make the most of the data based on the best “chess moves” of its grandmasters.
“So we’re using those algorithms, but we’re giving them the human insights from those data scientists, and we automate their thinking,” he explains. “So we created a virtual data scientist that is relentless at trying these ideas.”
Inside the Black Box
Not unlike how the human brain reaches a conclusion, it’s not always possible to understand how a machine, despite being designed by humans, reaches its own solutions. The lack of transparency is often referred to as the AI “black box.” Experts like Young say we can learn something about the evolutionary process of machine learning by generating millions of neural networks and seeing what works well and what doesn’t.
“You’re never going to be able to completely explain what happened, but maybe we can better explain it than we currently can today,” Young says.
Transparency is built into the “thought process” of each particular model generated by Driverless AI, according to Candel.
The computer even explains itself to the user in plain English at each decision point. There is also real-time feedback that allows users to prioritize features, or parameters, to see how the changes improve the accuracy of the model. For example, the system may include data from people in the same zip code as it creates a model to describe customer turnover.
“That’s one of the advantages of our automatic feature engineering: it’s basically mimicking human thinking,” Candel says. “It’s not just neural nets that magically come up with some kind of number, but we’re trying to make it statistically significant.”
Moving Forward
Much digital ink has been spilled over the dearth of skilled data scientists, so automating certain design aspects for developing artificial neural networks makes sense. Experts agree that automation alone won’t solve that particular problem. However, it will free computer scientists to tackle more difficult issues, such as parsing the inherent biases that exist within the data used by machine learning today.
“I think the world has an opportunity to focus more on the meaning of things and not on the laborious tasks of just fitting a model and finding the best features to make that model,” Candel notes. “By automating, we are pushing the burden back for the data scientists to actually do something more meaningful, which is think about the problem and see how you can address it differently to make an even bigger impact.”
The team at ORNL expects it can also make bigger impacts beginning next year when the lab’s next supercomputer, Summit, comes online. While Summit will boast only 4,600 nodes, it will sport the latest and greatest GPU technology from Nvidia and CPUs from IBM. That means it will deliver more than five times the computational performance of Titan, the world’s fifth-most powerful supercomputer today.
“We’ll be able to look at much larger problems on Summit than we were able to with Titan and hopefully get to a solution much faster,” Young says.
It’s all in a day’s work.
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#431733 Why Humanoid Robots Are Still So Hard to ...

Picture a robot. In all likelihood, you just pictured a sleek metallic or chrome-white humanoid. Yet the vast majority of robots in the world around us are nothing like this; instead, they’re specialized for specific tasks. Our cultural conception of what robots are dates back to the coining of the term robots in the Czech play, Rossum’s Universal Robots, which originally envisioned them as essentially synthetic humans.
The vision of a humanoid robot is tantalizing. There are constant efforts to create something that looks like the robots of science fiction. Recently, an old competitor in this field returned with a new model: Toyota has released what they call the T-HR3. As humanoid robots go, it appears to be pretty dexterous and have a decent grip, with a number of degrees of freedom making the movements pleasantly human.
This humanoid robot operates mostly via a remote-controlled system that allows the user to control the robot’s limbs by exerting different amounts of pressure on a framework. A VR headset completes the picture, allowing the user to control the robot’s body and teleoperate the machine. There’s no word on a price tag, but one imagines a machine with a control system this complicated won’t exactly be on your Christmas list, unless you’re a billionaire.

Toyota is no stranger to robotics. They released a series of “Partner Robots” that had a bizarre affinity for instrument-playing but weren’t often seen doing much else. Given that they didn’t seem to have much capability beyond the automaton that Leonardo da Vinci made hundreds of years ago, they promptly vanished. If, as the name suggests, the T-HR3 is a sequel to these robots, which came out shortly after ASIMO back in 2003, it’s substantially better.
Slightly less humanoid (and perhaps the more useful for it), Toyota’s HSR-2 is a robot base on wheels with a simple mechanical arm. It brings to mind earlier machines produced by dream-factory startup Willow Garage like the PR-2. The idea of an affordable robot that could simply move around on wheels and pick up and fetch objects, and didn’t harbor too-lofty ambitions to do anything else, was quite successful.
So much so that when Robocup, the international robotics competition, looked for a platform for their robot-butler competition @Home, they chose HSR-2 for its ability to handle objects. HSR-2 has been deployed in trial runs to care for the elderly and injured, but has yet to be widely adopted for these purposes five years after its initial release. It’s telling that arguably the most successful multi-purpose humanoid robot isn’t really humanoid at all—and it’s curious that Toyota now seems to want to return to a more humanoid model a decade after they gave up on the project.
What’s unclear, as is often the case with humanoid robots, is what, precisely, the T-HR3 is actually for. The teleoperation gets around the complex problem of control by simply having the machine controlled remotely by a human. That human then handles all the sensory perception, decision-making, planning, and manipulation; essentially, the hardest problems in robotics.
There may not be a great deal of autonomy for the T-HR3, but by sacrificing autonomy, you drastically cut down the uses of the robot. Since it can’t act alone, you need a convincing scenario where you need a teleoperated humanoid robot that’s less precise and vastly more expensive than just getting a person to do the same job. Perhaps someday more autonomy will be developed for the robot, and the master maneuvering system that allows humans to control it will only be used in emergencies to control the robot if it gets stuck.
Toyota’s press release says it is “a platform with capabilities that can safely assist humans in a variety of settings, such as the home, medical facilities, construction sites, disaster-stricken areas and even outer space.” In reality, it’s difficult to see such a robot being affordable or even that useful in the home or in medical facilities (unless it’s substantially stronger than humans). Equally, it certainly doesn’t seem robust enough to be deployed in disaster zones or outer space. These tasks have been mooted for robots for a very long time and few have proved up to the challenge.
Toyota’s third generation humanoid robot, the T-HR3. Image Credit: Toyota
Instead, the robot seems designed to work alongside humans. Its design, standing 1.5 meters tall, weighing 75 kilograms, and possessing 32 degrees of freedom in its body, suggests it is built to closely mimic a person, rather than a robot like ATLAS which is robust enough that you can imagine it being useful in a war zone. In this case, it might be closer to the model of the collaborative robots or co-bots developed by Rethink Robotics, whose tons of safety features, including force-sensitive feedback for the user, reduce the risk of terrible PR surrounding killer robots.
Instead the emphasis is on graceful precision engineering: in the promo video, the robot can be seen balancing on one leg before showing off a few poised, yoga-like poses. This perhaps suggests that an application in elderly care, which Toyota has ventured into before and which was the stated aim of their simple HSR-2, might be more likely than deployment to a disaster zone.
The reason humanoid robots remain so elusive and so tempting is probably because of a simple cognitive mistake. We make two bad assumptions. First, we assume that if you build a humanoid robot, give its joints enough flexibility, throw in a little AI and perhaps some pre-programmed behaviors, then presto, it will be able to do everything humans can. When you see a robot that moves well and looks humanoid, it seems like the hardest part is done; surely this robot could do anything. The reality is never so simple.

We also make the reverse assumption: we assume that when we are finally replaced, it will be by perfect replicas of our own bodies and brains that can fulfill all the functions we used to fulfill. Perhaps, in reality, the future of robots and AI is more like its present: piecemeal, with specialized algorithms and specialized machines gradually learning to outperform humans at every conceivable task without ever looking convincingly human.
It may well be that the T-HR3 is angling towards this concept of machine learning as a platform for future research. Rather than trying to program an omni-capable robot out of the box, it will gradually learn from its human controllers. In this way, you could see the platform being used to explore the limits of what humans can teach robots to do simply by having them mimic sequences of our bodies’ motion, in the same way the exploitation of neural networks is testing the limits of training algorithms on data. No one machine will be able to perform everything a human can, but collectively, they will vastly outperform us at anything you’d want one to do.
So when you see a new android like Toyota’s, feel free to marvel at its technical abilities and indulge in the speculation about whether it’s a PR gimmick or a revolutionary step forward along the road to human replacement. Just remember that, human-level bots or not, we’re already strolling down that road.
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#431599 8 Ways AI Will Transform Our Cities by ...

How will AI shape the average North American city by 2030? A panel of experts assembled as part of a century-long study into the impact of AI thinks its effects will be profound.
The One Hundred Year Study on Artificial Intelligence is the brainchild of Eric Horvitz, technical fellow and a managing director at Microsoft Research.
Every five years a panel of experts will assess the current state of AI and its future directions. The first panel, comprised of experts in AI, law, political science, policy, and economics, was launched last fall and decided to frame their report around the impact AI will have on the average American city. Here’s how they think it will affect eight key domains of city life in the next fifteen years.
1. Transportation
The speed of the transition to AI-guided transport may catch the public by surprise. Self-driving vehicles will be widely adopted by 2020, and it won’t just be cars — driverless delivery trucks, autonomous delivery drones, and personal robots will also be commonplace.
Uber-style “cars as a service” are likely to replace car ownership, which may displace public transport or see it transition towards similar on-demand approaches. Commutes will become a time to relax or work productively, encouraging people to live further from home, which could combine with reduced need for parking to drastically change the face of modern cities.
Mountains of data from increasing numbers of sensors will allow administrators to model individuals’ movements, preferences, and goals, which could have major impact on the design city infrastructure.
Humans won’t be out of the loop, though. Algorithms that allow machines to learn from human input and coordinate with them will be crucial to ensuring autonomous transport operates smoothly. Getting this right will be key as this will be the public’s first experience with physically embodied AI systems and will strongly influence public perception.
2. Home and Service Robots
Robots that do things like deliver packages and clean offices will become much more common in the next 15 years. Mobile chipmakers are already squeezing the power of last century’s supercomputers into systems-on-a-chip, drastically boosting robots’ on-board computing capacity.
Cloud-connected robots will be able to share data to accelerate learning. Low-cost 3D sensors like Microsoft’s Kinect will speed the development of perceptual technology, while advances in speech comprehension will enhance robots’ interactions with humans. Robot arms in research labs today are likely to evolve into consumer devices around 2025.
But the cost and complexity of reliable hardware and the difficulty of implementing perceptual algorithms in the real world mean general-purpose robots are still some way off. Robots are likely to remain constrained to narrow commercial applications for the foreseeable future.
3. Healthcare
AI’s impact on healthcare in the next 15 years will depend more on regulation than technology. The most transformative possibilities of AI in healthcare require access to data, but the FDA has failed to find solutions to the difficult problem of balancing privacy and access to data. Implementation of electronic health records has also been poor.
If these hurdles can be cleared, AI could automate the legwork of diagnostics by mining patient records and the scientific literature. This kind of digital assistant could allow doctors to focus on the human dimensions of care while using their intuition and experience to guide the process.
At the population level, data from patient records, wearables, mobile apps, and personal genome sequencing will make personalized medicine a reality. While fully automated radiology is unlikely, access to huge datasets of medical imaging will enable training of machine learning algorithms that can “triage” or check scans, reducing the workload of doctors.
Intelligent walkers, wheelchairs, and exoskeletons will help keep the elderly active while smart home technology will be able to support and monitor them to keep them independent. Robots may begin to enter hospitals carrying out simple tasks like delivering goods to the right room or doing sutures once the needle is correctly placed, but these tasks will only be semi-automated and will require collaboration between humans and robots.
4. Education
The line between the classroom and individual learning will be blurred by 2030. Massive open online courses (MOOCs) will interact with intelligent tutors and other AI technologies to allow personalized education at scale. Computer-based learning won’t replace the classroom, but online tools will help students learn at their own pace using techniques that work for them.
AI-enabled education systems will learn individuals’ preferences, but by aggregating this data they’ll also accelerate education research and the development of new tools. Online teaching will increasingly widen educational access, making learning lifelong, enabling people to retrain, and increasing access to top-quality education in developing countries.
Sophisticated virtual reality will allow students to immerse themselves in historical and fictional worlds or explore environments and scientific objects difficult to engage with in the real world. Digital reading devices will become much smarter too, linking to supplementary information and translating between languages.
5. Low-Resource Communities
In contrast to the dystopian visions of sci-fi, by 2030 AI will help improve life for the poorest members of society. Predictive analytics will let government agencies better allocate limited resources by helping them forecast environmental hazards or building code violations. AI planning could help distribute excess food from restaurants to food banks and shelters before it spoils.
Investment in these areas is under-funded though, so how quickly these capabilities will appear is uncertain. There are fears valueless machine learning could inadvertently discriminate by correlating things with race or gender, or surrogate factors like zip codes. But AI programs are easier to hold accountable than humans, so they’re more likely to help weed out discrimination.
6. Public Safety and Security
By 2030 cities are likely to rely heavily on AI technologies to detect and predict crime. Automatic processing of CCTV and drone footage will make it possible to rapidly spot anomalous behavior. This will not only allow law enforcement to react quickly but also forecast when and where crimes will be committed. Fears that bias and error could lead to people being unduly targeted are justified, but well-thought-out systems could actually counteract human bias and highlight police malpractice.
Techniques like speech and gait analysis could help interrogators and security guards detect suspicious behavior. Contrary to concerns about overly pervasive law enforcement, AI is likely to make policing more targeted and therefore less overbearing.
7. Employment and Workplace
The effects of AI will be felt most profoundly in the workplace. By 2030 AI will be encroaching on skilled professionals like lawyers, financial advisers, and radiologists. As it becomes capable of taking on more roles, organizations will be able to scale rapidly with relatively small workforces.
AI is more likely to replace tasks rather than jobs in the near term, and it will also create new jobs and markets, even if it’s hard to imagine what those will be right now. While it may reduce incomes and job prospects, increasing automation will also lower the cost of goods and services, effectively making everyone richer.
These structural shifts in the economy will require political rather than purely economic responses to ensure these riches are shared. In the short run, this may include resources being pumped into education and re-training, but longer term may require a far more comprehensive social safety net or radical approaches like a guaranteed basic income.
8. Entertainment
Entertainment in 2030 will be interactive, personalized, and immeasurably more engaging than today. Breakthroughs in sensors and hardware will see virtual reality, haptics and companion robots increasingly enter the home. Users will be able to interact with entertainment systems conversationally, and they will show emotion, empathy, and the ability to adapt to environmental cues like the time of day.
Social networks already allow personalized entertainment channels, but the reams of data being collected on usage patterns and preferences will allow media providers to personalize entertainment to unprecedented levels. There are concerns this could endow media conglomerates with unprecedented control over people’s online experiences and the ideas to which they are exposed.
But advances in AI will also make creating your own entertainment far easier and more engaging, whether by helping to compose music or choreograph dances using an avatar. Democratizing the production of high-quality entertainment makes it nearly impossible to predict how highly fluid human tastes for entertainment will develop.
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#431543 China Is an Entrepreneurial Hotbed That ...

Last week, Eric Schmidt, chairman of Alphabet, predicted that China will rapidly overtake the US in artificial intelligence…in as little as five years.
Last month, China announced plans to open a $10 billion quantum computing research center in 2020.
Bottom line, China is aggressively investing in exponential technologies, pursuing a bold goal of becoming the global AI superpower by 2030.
Based on what I’ve observed from China’s entrepreneurial scene, I believe they have a real shot of hitting that goal.
As I described in a previous tech blog, I recently traveled to China with a group of my Abundance 360 members, where I was hosted by my friend Kai-Fu Lee, the founder, chairman, and CEO of Sinovation Ventures.
On one of our first nights, Kai-Fu invited us to a special dinner at Da Dong Roast, which specializes in Peking duck, where we shared an 18-course meal.
The meal was amazing, and Kai-Fu’s dinner conversation provided us priceless insights on Chinese entrepreneurs.
Three topics opened my eyes. Here’s the wisdom I’d like to share with you.
1. The Entrepreneurial Culture in China
Chinese entrepreneurship has exploded onto the scene and changed significantly over the past 10 years.
In my opinion, one significant way that Chinese entrepreneurs vary from their American counterparts is in work ethic. The mantra I found in the startups I visited in Beijing and Shanghai was “9-9-6”—meaning the employees only needed to work from 9 am to 9 pm, 6 days a week.
Another concept Kai-Fu shared over dinner was the almost ‘dictatorial’ leadership of the founder/CEO. In China, it’s not uncommon for the Founder/CEO to own the majority of the company, or at least 30–40 percent. It’s also the case that what the CEO says is gospel. Period, no debate. There is no minority or dissenting opinion. When the CEO says “march,” the company asks, “which way?”
When Kai-Fu started Sinovation (his $1 billion+ venture fund), there were few active angel investors. Today, China has a rich ecosystem of angel, venture capital, and government-funded innovation parks.
As venture capital in China has evolved, so too has the mindset of the entrepreneur.
Kai -Fu recalled an early investment he made in which, after an unfortunate streak, the entrepreneur came to him, almost in tears, apologizing for losing his money and promising he would earn it back for him in another way. Kai-Fu comforted the entrepreneur and said there was no such need.
Only a few years later, the situation was vastly different. An entrepreneur who was going through a similar unfortunate streak came to Kai Fu and told him he only had $2 million left of his initial $12 million investment. He informed him he saw no value in returning the money and instead was going to take the last $2 million and use it as a final push to see if the company could succeed. He then promised Kai-Fu if he failed, he would remember what Kai-Fu did for him and, as such, possibly give Sinovation an opportunity to invest in him with his next company.
2. Chinese Companies Are No Longer Just ‘Copycats’
During dinner, Kai-Fu lamented that 10 years ago, it would be fair to call Chinese companies copycats of American companies. Five years ago, the claim would be controversial. Today, however, Kai-Fu is clear that claim is entirely false.
While smart Chinese startups will still look at what American companies are doing and build on trends, today it’s becoming a wise business practice for American tech giants to analyze Chinese companies. If you look at many new features of Facebook’s Messenger, it seems to very closely mirror TenCent’s WeChat.
Interestingly, tight government controls in China have actually spurred innovation. Take TV, for example, a highly regulated industry. Because of this regulation, most entertainment in China is consumed on the internet or by phone. Game shows, reality shows, and more will be entirely centered online.
Kai-Fu told us about one of his investments in a company that helps create Chinese singing sensations. They take girls in from a young age, school them, and regardless of talent, help build their presence and brand as singers. Once ready, these singers are pushed across all the available platforms, and superstars are born. The company recognizes its role in this superstar status, though, which is why it takes a 50 percent cut of all earnings.
This company is just one example of how Chinese entrepreneurs take advantage of China’s unique position, market, and culture.
3. China’s Artificial Intelligence Play
Kai-Fu wrapped up his talk with a brief introduction into the expansive AI industry in China. I previously discussed Face++, a Sinovation investment, which is creating radically efficient facial recognition technology. Face++ is light years ahead of anyone else globally at recognition in live videos. However, Face++ is just one of the incredible advances in AI coming out of China.
Baidu, one of China’s most valuable tech companies, started out as just a search company. However, they now run one of the country’s leading self-driving car programs.
Baidu’s goal is to create a software suite atop existing hardware that will control all self-driving aspects of a vehicle but also be able to provide additional services such as HD mapping and more.
Another interesting application came from another of Sinovation’s investments, Smart Finance Group (SFG). Given most payments are mobile (through WeChat or Alipay), only ~20 percent of the population in China have a credit history. This makes it very difficult for individuals in China to acquire a loan.
SFG’s mobile application takes in user data (as much as the user allows) and, based on the information provided, uses an AI agent to create a financial profile with the power to offer an instant loan. This loan can be deposited directly into their WeChat or Alipay account and is typically approved in minutes. Unlike American loan companies, they avoid default and long-term debt by only providing a one-month loan with 10% interest. Borrow $200, and you pay back $220 by the following month.
Artificial intelligence is exploding in China, and Kai-Fu believes it will touch every single industry.
The only constant is change, and the rate of change is constantly increasing.
In the next 10 years, we’ll see tremendous changes on the geopolitical front and the global entrepreneurial scene caused by technological empowerment.
China is an entrepreneurial hotbed that cannot be ignored. I’m monitoring it closely. Are you?
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