How the Rules in China May Allow the Chinese Tech Companies to Become World Leaders in Artificial Intelligence
One of the more interesting presentations I attended at the 2019 SXSW Conference in Austin was given by Bessie Lee, founder and CEO of China-based startup incubator Withinlink and one of the major thought leaders in the marketing technology that supports China’s media communications industry. She gave an overview of key Chinese efforts at developing artificial intelligence capability that may allow Chinese companies to have significant and sustainable advantages over their competitors in North America, Europe, and elsewhere.
While her talk was titled “How AI is Changing Advertising in China,” after hearing her presentation, I thought that a more appropriate title was the one I gave to this article, “How the Rules in China May Allow the Chinese Tech Companies to Become World Leaders in Artificial Intelligence.” Her presentation illustrated how companies in China are allowed to own and control a constellation of online assets that allow the largest of them, such as Tencent, to keep users within their online ecosystems for many of their daily needs.
In the US and elsewhere, it is common for heavy users of online services to use multiple apps by different service providers. This is in part due to policies, particularly antitrust laws in the US, that prevent very large companies from dominating an industry. One example of the effects of those laws is from the US aviation industry. In the early 20th century, Boeing was part of a larger corporation that had business units involved in several areas of aviation, including aircraft manufacturing, aircraft engine manufacturing, and airline operations. That corporation was broken up and three of its major parts became Boeing, the engine manufacturer Pratt and Whitney, and United Airlines. Even if Boeing decided to recreate the past by buying companies that would allow it to reenter the airline or aircraft engine manufacturing markets, US antitrust laws would likely prevent that from happening.
In China, technology companies are allowed to have several business units that provide services that are performed by several companies elsewhere. If you can imagine Google, Facebook, Uber, PayPal, Tinder, Twitter, and Amazon being under the control of one company, you can get an idea of just how influential a single Chinese media company can be in a user’s life. Instead of using multiple apps from different companies on a daily basis, Chinese consumers could instead remain in the ecosystem of a single company for most of their online needs.
A map of the Chinese social media and internet ecosystem
This reality for Chinese companies provides them with an ability to develop AI-related insights that would be difficult for any non-Chinese tech company or online service provider to duplicate. This is because of something that is fundamental to the development of AI-related technologies. This is because, in order to develop AI capabilities such as voice recognition, machine vision, and machine learning, the developers of AI algorithms and the software that runs those algorithms require raw data.
Because the largest Chinese tech companies can collect data about the behaviour of individuals from a much wider range of activities than the largest tech companies outside of China, the Chinese companies likely will be able to have more accurate predictions of user behavior and user needs compared to companies that have more limited insights into the lives of their users.
The Government of China and their role
The role of the government in China is also much different than the relationship the commonly exists in most countries outside of China. For example, Bessie Lee explained that the central government in 2017 put out overall directions for China’s AI efforts, including desired key performance indicators (KPIs), in a wide-ranging plan that runs through 2030. It would be hard to imagine a US or European government being able to have the largest tech companies to even consider following such advice.
The picture that emerged from Bessie Lee’s talk was of a Chinese business environment that may over the next decade or so allow the largest Chinese companies to develop an understanding of AI that may be superior to the AI technologies developed outside of China. A consequence of that potential future reality is that Chinese companies may be able to apply those AI-related technological capabilities either directly in Chinese-owned companies that operate outside of China, or in partnership with non-Chinese companies that incorporate Chinese AI technologies. Either way, any potential competitor could be operating at a distinct disadvantage.