Book notes - AI Superpowers by Kai-Fu Lee
The AlphaGo Awakening: How an AI Victory Ignited China’s Artificial Intelligence Ambitions
In the beginning of the book “AI Superpowers” by Kai-Fu Lee, the author discusses the historic match between Google’s AI program, AlphaGo, and the world’s top Go player, Ke Jie. The game of Go, a complex and strategic board game, has long been considered a pinnacle of human intelligence and creativity, making the match a significant milestone in the field of artificial intelligence.
The ancient game of Go, believed to have been invented over 2,500 years ago, has long been a significant part of Chinese culture and tradition. As one of the four esteemed art forms that every Chinese scholar was expected to master, Go has held a special place in the hearts and minds of many generations. The game, with its intricate strategies and complex gameplay, represents the epitome of human intellect and creativity.
The astonishing victory of Google’s AlphaGo, an artificial intelligence algorithm, over the world’s top Go player, Ke Jie, in 2017, sent shockwaves throughout China. This unprecedented event, which saw a machine surpassing human mastery in one of the most revered and intricate games, sparked a widespread AI frenzy in the country. The realization that AI had advanced to such a degree led to a significant shift in China’s perception of artificial intelligence, propelling the nation into an era of rapid AI development and competition on the global stage.
The chapter recounts how AlphaGo’s victory over Ke Jie in May 2017 served as a wake-up call for China, signaling the immense potential of AI and its possible implications for the future of technology and global power dynamics. Until that point, many in China had underestimated the rapid advancements in AI, particularly those made by US-based companies like Google. The match demonstrated that AI was no longer a distant concept but a fast-evolving reality with the potential to surpass human capabilities in various domains.
China’s Data Advantage: Fueling the AI Revolution
In the race to dominate the field of artificial intelligence, China possesses a significant advantage due to its unparalleled access to vast amounts of data. In the realm of deep learning, data has emerged as a critical factor for success, often proving more important than the sophistication of the algorithms themselves. Given sufficient data, even a relatively simple algorithm can outperform a complex one with limited data access. This is because deep learning algorithms thrive on large datasets to recognize patterns, make predictions, and improve their performance. As the world’s most populous country, China generates massive amounts of data daily, providing an invaluable resource for training AI systems. This data advantage has played a crucial role in propelling China’s rapid advancements in AI technologies and bolstering its position as a global contender in the field.
Copycat Culture: The Gladiators of the Entrepreneurial World
A striking distinction between China’s tech landscape and Silicon Valley lies in the sheer competitiveness and prevalence of the copycat culture. In China, the business environment is characterized by an unrelenting focus on speed, where imitation is often considered an acceptable practice, and the competition is relentless. This highly aggressive atmosphere has given rise to what the author describes as the “gladiators of the entrepreneurial world” – individuals and companies that are willing to do whatever it takes to emerge victorious in the cutthroat market. This ruthless approach to business, fueled by the relentless pursuit of success, has played a pivotal role in shaping China’s unique and dynamic technological landscape, driving rapid innovation and growth across industries.
On the importance of the localisation of the products, a Google China anecdote
A striking difference between American and Chinese internet users lies in their distinct search behaviors. When using search engines like Google, American users typically find a single result and click on it, expecting a relevant and useful outcome. In contrast, Chinese users approach search engines more like a bustling bazaar, where they prefer to view multiple results and select the one that appeals to them the most. This cultural difference in user behavior presented a challenge for Chinese engineers when attempting to localize Google search for the Chinese market. Despite their efforts, they were unable to convince their American counterparts to modify the search engine’s functionality to accommodate the Chinese preference for opening results in new tabs. This example underscores the importance of understanding and adapting to local user behavior and cultural nuances when attempting to succeed in a foreign market.
Startup Wars
The competition between Qihoo and QQ exemplifies the intense rivalry between Chinese tech companies. Qihoo, an internet security firm, and QQ, a popular messaging platform developed by Tencent, both sought dominance in the Chinese internet market.
Qihoo’s aggressive growth strategy involved offering free antivirus software, which helped the company gain a significant user base. The company then expanded its product line to include a web browser, search engine, and mobile app store. QQ, on the other hand, became widely popular as a messaging app and experienced rapid growth. Tencent leveraged its vast user base to introduce new services such as gaming, e-commerce, and social networking.
The rivalry between Qihoo and QQ intensified when Qihoo’s web browser blocked QQ’s messaging service. Tencent retaliated by blocking Qihoo’s search engine on its platform. This led to a fierce battle between the two companies, each trying to outdo the other in terms of product innovation, marketing, and strategic alliances. Qihoo created a “privacy protection” software targeting Tencent products, which issued safety warnings each time a Tencent product was opened. Qihoo then released a “security” software that filtered all ads on Tencent’s platform, aiming to disrupt Tencent’s revenue stream.
In response, Tencent called the police to raid Qihoo’s offices. Over thirty police officers raided the Qihoo offices, and Zhou Hongyi, the company’s CEO, flew to Hong Kong to avoid detainment. The situation eventually worsened, prompting government intervention.
Another example of rivalry is between the Renren and Kaixin001 social networks. Renren emerged in 2006 as a Facebook-like social network. In 2008, it faced a challenger named Kaixin001. Unlike Renren, Kaixin001 targeted young urbanites rather than college students and quickly became the fastest-growing social network. Kaixin001 was a solid product, but its founder was not a “gladiator.” He could not secure the www.kaixin.com domain and settled for www.kaixin001.com. Renren’s founder, Wang Xing, seized the opportunity, bought the www.kaixin.com domain, and created an exact copy of Kaixin001 called “The Real Kaixin Net.” Users attempting to visit Kaixin found themselves on Renren instead, and few noticed the difference. Renren later announced plans to merge Kaixin and Renren users, effectively stealing the user base. Kaixin001 sued Renren and received $60,000 in compensation. A month later, Renren went public on the New York Stock Exchange, raising $740 million.
Silicon Valley’s Light Touch vs. China’s Heavyweight Approach: Contrasting Business Strategies
The author contrasts the business approaches of Silicon Valley and Chinese companies, referring to them as the “light touch” and “heavyweight” approaches, respectively. The light touch approach, often employed by Silicon Valley firms, involves creating a product and allowing users to determine its quality and success. This hands-off strategy focuses on innovation and user experience without getting too involved in the end-to-end process.
In contrast, the heavyweight approach, commonly adopted by Chinese companies, goes beyond merely building a product. These companies recruit each seller, handle the goods, deliver items to customers, supply and, if necessary, repair equipment such as scooters, and manage payments, among other tasks. This all-encompassing strategy reflects a more involved and hands-on approach to business, taking control of every aspect of the value chain to ensure success.
Divergent Strategies: US and Chinese Approaches to Global Market Expansion.
US companies typically focus on launching their products and services in international markets, leveraging their strong brand presence and advanced technologies. They often aim to directly compete with local companies by offering superior or innovative products, which they hope will attract customers.
In contrast, Chinese companies adopt a different approach by investing in local startups in the target countries. They recognize that these “scrappy” local startups have a better understanding of their home markets, consumer behavior, and cultural nuances. By investing in these startups, Chinese companies can gain a foothold in foreign markets and leverage the local startups’ knowledge and networks to expand their own influence.
This approach allows Chinese companies to support local startups in their fight against US competitors, which can help create a more level playing field. Additionally, by partnering with or investing in local startups, Chinese companies can also benefit from technology and knowledge transfers, gaining valuable insights that can be applied to their own businesses.
Alibaba’s acquisition of Trendyol, a leading Turkish e-commerce platform, serves as a prime example of Chinese companies’ strategy of investing in local startups to compete with US giants like Amazon. In 2018, Alibaba acquired a significant stake in Trendyol, Turkey’s largest online retailer. This investment enabled Alibaba to rapidly gain a strong foothold in the Turkish e-commerce market, which was witnessing a growing rivalry between local players and Amazon. Through this acquisition, Alibaba supported Trendyol’s growth and expansion, allowing it to better compete with Amazon in the Turkish market. Trendyol benefitted from Alibaba’s vast resources, expertise, and technology, which helped it to enhance its platform, logistics, and payment systems. As a result, Trendyol was able to offer a more competitive and improved service to its customers, thereby strengthening its position against Amazon. This example showcases the strategy employed by Chinese companies like Alibaba, where they invest in local startups to foster their growth and competitiveness, rather than directly competing with US rivals. This approach allows Chinese companies to expand their global influence and secure market share while empowering local startups to succeed against well-established international competitors.