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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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Many of us intuitively think about intelligence as an individual trait. As a society, we have a tendency to praise individual game-changers for accomplishments that would not be possible without their teams, often tens of thousands of people that work behind the scenes to make extraordinary things happen.
Matt Ridley, best-selling author of multiple books, including The Rational Optimist: How Prosperity Evolves, challenges this view. He argues that human achievement and intelligence are entirely “networking phenomena.” In other words, intelligence is collective and emergent as opposed to individual.
When asked what scientific concept would improve everybody’s cognitive toolkit, Ridley highlights collective intelligence: “It is by putting brains together through the division of labor— through trade and specialization—that human society stumbled upon a way to raise the living standards, carrying capacity, technological virtuosity, and knowledge base of the species.”
Ridley has spent a lifetime exploring human prosperity and the factors that contribute to it. In a conversation with Singularity Hub, he redefined how we perceive intelligence and human progress.
Raya Bidshahri: The common perspective seems to be that competition is what drives innovation and, consequently, human progress. Why do you think collaboration trumps competition when it comes to human progress?
Matt Ridley: There is a tendency to think that competition is an animal instinct that is natural and collaboration is a human instinct we have to learn. I think there is no evidence for that. Both are deeply rooted in us as a species. The evidence from evolutionary biology tells us that collaboration is just as important as competition. Yet, at the end, the Darwinian perspective is quite correct: it’s usually cooperation for the purpose of competition, wherein a given group tries to achieve something more effectively than another group. But the point is that the capacity to co-operate is very deep in our psyche.
RB: You write that “human achievement is entirely a networking phenomenon,” and we need to stop thinking about intelligence as an individual trait, and that instead we should look at what you refer to as collective intelligence. Why is that?
MR: The best way to think about it is that IQ doesn’t matter, because a hundred stupid people who are talking to each other will accomplish more than a hundred intelligent people who aren’t. It’s absolutely vital to see that everything from the manufacturing of a pencil to the manufacturing of a nuclear power station can’t be done by an individual human brain. You can’t possibly hold in your head all the knowledge you need to do these things. For the last 200,000 years we’ve been exchanging and specializing, which enables us to achieve much greater intelligence than we can as individuals.
RB: We often think of achievement and intelligence on individual terms. Why do you think it’s so counter-intuitive for us to think about collective intelligence?
MR: People are surprisingly myopic to the extent they understand the nature of intelligence. I think it goes back to a pre-human tendency to think in terms of individual stories and actors. For example, we love to read about the famous inventor or scientist who invented or discovered something. We never tell these stories as network stories. We tell them as individual hero stories.
“It’s absolutely vital to see that everything from the manufacturing of a pencil to the manufacturing of a nuclear power station can’t be done by an individual human brain.”
This idea of a brilliant hero who saves the world in the face of every obstacle seems to speak to tribal hunter-gatherer societies, where the alpha male leads and wins. But it doesn’t resonate with how human beings have structured modern society in the last 100,000 years or so. We modern-day humans haven’t internalized a way of thinking that incorporates this definition of distributed and collective intelligence.
RB: One of the books you’re best known for is The Rational Optimist. What does it mean to be a rational optimist?
MR: My optimism is rational because it’s not based on a feeling, it’s based on evidence. If you look at the data on human living standards over the last 200 years and compare it with the way that most people actually perceive our progress during that time, you’ll see an extraordinary gap. On the whole, people seem to think that things are getting worse, but things are actually getting better.
We’ve seen the most astonishing improvements in human living standards: we’ve brought the number of people living in extreme poverty to 9 percent from about 70 percent when I was born. The human lifespan is expanding by five hours a day, child mortality has gone down by two thirds in half a century, and much more. These feats dwarf the things that are going wrong. Yet most people are quite pessimistic about the future despite the things we’ve achieved in the past.
RB: Where does this idea of collective intelligence fit in rational optimism?
MR: Underlying the idea of rational optimism was understanding what prosperity is, and why it happens to us and not to rabbits or rocks. Why are we the only species in the world that has concepts like a GDP, growth rate, or living standard? My answer is that it comes back to this phenomena of collective intelligence. The reason for a rise in living standards is innovation, and the cause of that innovation is our ability to collaborate.
The grand theme of human history is exchange of ideas, collaborating through specialization and the division of labor. Throughout history, it’s in places where there is a lot of open exchange and trade where you get a lot of innovation. And indeed, there are some extraordinary episodes in human history when societies get cut off from exchange and their innovation slows down and they start moving backwards. One example of this is Tasmania, which was isolated and lost a lot of the technologies it started off with.
RB: Lots of people like to point out that just because the world has been getting better doesn’t guarantee it will continue to do so. How do you respond to that line of argumentation?
MR: There is a quote by Thomas Babington Macaulay from 1830, where he was fed up with the pessimists of the time saying things will only get worse. He says, “On what principle is it that with nothing but improvement behind us, we are to expect nothing but deterioration before us?” And this was back in the 1830s, where in Britain and a few other parts of the world, we were only seeing the beginning of the rise of living standards. It’s perverse to argue that because things were getting better in the past, now they are about to get worse.
“I think it’s worth remembering that good news tends to be gradual, and bad news tends to be sudden. Hence, the good stuff is rarely going to make the news.”
Another thing to point out is that people have always said this. Every generation thought they were at the peak looking downhill. If you think about the opportunities technology is about to give us, whether it’s through blockchain, gene editing, or artificial intelligence, there is every reason to believe that 2017 is going to look like a time of absolute misery compared to what our children and grandchildren are going to experience.
RB: There seems to be a fair amount of mayhem in today’s world, and lots of valid problems to pay attention to in the news. What would you say to empower our readers that we will push through it and continue to grow and improve as a species?
MR: I think it’s worth remembering that good news tends to be gradual, and bad news tends to be sudden. Hence, the good stuff is rarely going to make the news. It’s happening in an inexorable way, as a result of ordinary people exchanging, specializing, collaborating, and innovating, and it’s surprisingly hard to stop it.
Even if you look back to the 1940s, at the end of a world war, there was still a lot of innovation happening. In some ways it feels like we are going through a bad period now. I do worry a lot about the anti-enlightenment values that I see spreading in various parts of the world. But then I remind myself that people are working on innovative projects in the background, and these things are going to come through and push us forward.
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