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Wednesday, August 22, 2018
Notations From the Grid (Weekly Edition): #ChinaRising
Our team ran across this "image from the past" about simpler times--this particular one was from Iran. But times are changing--and the giants of China are ar the forefront of it. Our team chose notations from Peter Diamandis in his notations to his Subscriber Base as he talked about about China last week. Our team chose these for all to review which must be of note and hereby consider it for all to review on the power of the "BAT" and the push by China to dominate Artificial Intelligence (AI):
Baidu, Alibaba and Tencent (BAT) are now valued at a combined $1 trillion USD.
Alibaba and Tencent alone now account for almost one-third of the MSCI China Index, fueling its 47 percent gain in 2017.
As of this past March, China had skyrocketed to 164 unicorns, worth a combined $628.4 billion USD. Roughly 50 percent are controlled or backed by BAT.
But BAT isn’t keeping ambitions local. Worldwide, BAT invests in over 150 companies, spanning the gamut from AI to biotech.
And with access to more internet users than the U.S. and all of Europe combined, BAT is fueled by the greatest treasure trove of data on the planet.
Now rivaling the likes of FANG, these homegrown Chinese tech giants are driving China’s AI revolution at an unprecedented pace, building out everything from autonomous vehicles and smart cities to facial recognition capabilities and AI-driven healthcare platforms.
And with China’s favoring of homegrown players -- applying tight domestic restrictions on FAMGA (kicking out Facebook and Google entirely in 2009 and 2010) -- BAT works more and more tightly with state-run initiatives.
In November 2017, China’s Ministry of Science and Technology announced a new wave of “open innovation platforms,” relying on Baidu for rollout of autonomous vehicles, Alibaba Cloud (Aliyun) for smart cities, and Tencent for medical imaging and diagnostics.
But while BAT are increasingly embroiled in China’s state agenda, they are also expanding their control to other APAC countries and consumers, recruiting U.S. talent, investing in startups from Canada to Israel, and forming global partnerships in everything from predictive healthcare to conversational AI.
By adopting a platform-based business strategy -- expanding horizontally via major acquisitions and equity positions -- BAT have gained unparalleled influence in almost every aspect of users’ lives.
In this blog, I’ll be looking at some of the biggest BAT highlights, strategies, and state-corporate collaborations catapulting these three AI giants to (global) dominance.
Of all the BAT giants, Baidu was the first to pioneer and apply deep learning, scoring a big win in 2014 with the hire of Andrew Ng to head Baidu’s Silicon Valley AI lab.
By 2015, Baidu’s AI algorithms had already surpassed humans in Chinese speech recognition, a full year before Microsoft achieved the same feat in English.
Fast forward to 2017, and China’s dominant search engine now heads up national initiatives in AI R&D, driverless vehicles and international open source platforms.
Expecting second-quarter revenues of around 26 billion RMB (approximately $4 billion USD), Baidu continues to beat forecasts, with total revenues increasing 31 percent year on year.
And as Baidu continues expanding into adjacent markets, this growth will only accelerate.
With multiple driverless vehicle patents to its name (15 published in the U.S. alone), Baidu announced its international open-source Apollo platform last year to turbocharge autonomous driving solutions.
Hosting over 95 partners around the globe -- including Nvidia, Ford and Daimler -- Apollo’s ecosystem makes source code available to everyone. This means companies can build on existing research versus starting from scratch, massively accelerating progress.
And as of June 2018, Baidu is putting driverless cars on the road. Launching tests on an unused expressway in China’s industrial city of Tianjin, Baidu has already signed agreements with the local government of Xiong’an New Area to build an AI City, decked out with autonomous cars, smart traffic systems, facial recognition and sensor-loaded cement.
But it doesn’t stop there.
Already heading China’s National Engineering Lab for Deep Learning Technologies, Baidu is also working on brain-inspired neural chips and intelligent robotics under China’s state-run umbrella.
If those projects weren’t enough to convince you of Baidu’s ambitions, the search engine is getting serious about speech recognition, aiming to win big in the voice assistant market.
With voice patents in both the U.S. and Japan, Baidu most recently launched ‘Aladdin’ -- a 3-in-1 smart speaker, smart lamp and projector for the Japanese market -- showcasing its product at CES 2018 (the Consumer Electronics Show).
Built on Baidu’s conversational AI platform, DuerOS, Aladdin is only the first of many Baidu consumer products that will rival the likes of Amazon’s Alexa and Google Assistant. Hinted at by a patent published with the U.S., China, Europe, South Korea and Japan, Baidu may soon be rolling out a consumer robot equipped with both voice and facial recognition.
And while Baidu takes charge of driverless vehicles and voice recognition, Alibaba’s been anointed to spearhead smart cities.
China’s leading e-commerce behemoth, Alibaba has made an unbelievable dent in the Chinese retail and financial sectors.
Witnessing a 62 percent rise in sales from core commerce in Q1 of this year, Alibaba has built far more than a digital marketplace.
Leading the world in fintech disruption, Alibaba's Ant Financial Services Group, which controls the world’s largest money-market fund, has made loans to tens of millions, handled more payments in 2017 than MasterCard, and completed over $8 trillion of transactions via its online payments platform last year alone.
Home to both Tmall (B2C) and Taobao (C2C)--China’s top online marketplaces--Alibaba has taken its legacy worldwide with foreign-facing AliExpress. But the real treasure trove of real-world data lies in Alipay, Alibaba’s mobile payments platform.
While mobile payments make up less than 1 percent of overall in-store transaction volume in the U.S., they are almost indispensable in China.
Pedestrians pay streetside fruit vendors through QR codes. Charitable givers use Alipay or Wechat Wallet when donating to relief funds or directly to affected families. And at one Hangzhou-based KFC, Alipay debuted the concept of paying with your face.
Already geared with facial recognition for user sign-in, Alibaba’s Alipay has more than half a billion users worldwide.
But Alibaba is setting its sights far further afield than just online retail and mobile payments.
Working with several local governments, including that of Macau and Chinese city Hangzhou, Alibaba is at the forefront of smart cities.
Alibaba’s AI cloud platform “ET City Brain” uses AI algorithms to predict outcomes across traffic management, healthcare and urban planning, crunching data from cameras, sensors, social media and government data.
Aiming to revolutionize urban management, Alibaba has partnered with Nvidia for its deep-learning-based video platform for smart city services. Alibaba recently led a financing round for Chinese computer vision startup SenseTime, now the highest valued AI startup in the world.
Just this year, Alibaba backed AI-based vehicle-to-vehicle network developer Nexar, and has even partnered with the Malaysian government to launch the country’s first City Brain initiative. Targeting traffic, City Brain can optimize urban traffic flow, getting emergency vehicles to the scene at record speeds.
Alibaba’s reach extends far beyond Asia. Already with operations in over 200 countries, Alibaba is now launching a global $15 billion R&D initiative in AI, quantum computing and emerging new tech-driven markets.
Scoring top local talent, Alibaba’s R&D center, DAMO Academy, is set to launch in Tel Aviv’s thriving tech hub, among six other cities.
When it comes to Chinese tech giants with absolutely no analog in the West, Tencent takes the cake. Hands-down.
Briefly surpassing Facebook’s market cap in November of last year, Tencent was the first Chinese company to top $500 billion.
With over 1 billion users, Tencent’s WeChat is like a digital Swiss army knife on steroids.
Combining the functionality of Facebook, iMessage, PayPal, UberEats, Instagram, Expedia, Skype, WebMD, eVite, GroupMe and many others, WeChat is an ecosystem of epic proportions.
Businesses coordinate large-scale events, people order personal in-home masseurs, and tycoons pay hefty sums, all without ever leaving the mobile app.
This year at Abundance 360, one of our Chinese members was disappointed to hear he couldn’t pay his $37,500 3-year renewal fee over WeChat. Wanting to simply coordinate with a member of my team through the mobile app, he explained that “no one in China uses email anymore.”
After the app’s simple functionality took off among Chinese consumers, WeChat hit 100 million registered users within a year and 300 million by its second anniversary, adding on functions left and right way before Western counterparts like WhatsApp thought to do the same.
Just last year, around 38,000 medical institutions reported having WeChat accounts, 60 percent of which let users register for appointments online. And when it comes to paying your hospital bill, more than 2,000 hospitals accept WeChat Wallet payments.
To solidify its loyal consumer base, Tencent has also become a leader in mobile gaming, owning the wildly popular League of Legends, played by over 100 million people every month.
Rapidly iterating to meet consumer demands, WeChat has made itself almost indispensable to the daily lives of its users, gaining brand loyalty that American social media platforms could only dream of.
And now, Tencent is making extraordinary new inroads in AI-based healthcare disruption under Chinese government leadership.
Hiring scores of researchers and opening an outpost in Seattle, Tencent is massively ramping up AI capabilities. Aiming at world-class status in genomics and personalized medicine, the company further invests in and partners with global startups to bring AI healthcare tech to China.
Just last April, Tencent partnered with UK’s Babylon Health, a virtual healthcare assistant startup, whose app now allows Chinese users to message their symptoms and receive immediate medical feedback.
Most notably, Tencent recently participated in a $154 million mega-round for China-based healthcare AI unicorn iCarbonX. Hoping to develop a complete digital representation of your biological self, iCarbonX has acquired numerous American personalized medicine startups.
And in addition to Tencent’s own Miying healthcare AI platform -- aimed at assisting healthcare institutions in AI-driven cancer diagnostics -- Tencent is quickly expanding into the drug discovery space, participating in two multimillion-dollar, U.S.-based AI drug discovery deals just this year.
China’s tech behemoths are disrupting everything from intelligent urban infrastructure to personalized medicine.
But they aren’t just revolutionizing these industries on their home turf. They’re bringing enormous sums of capital and cutting edge technology to startups and markets across the globe. The pie isn’t getting smaller -- it’s getting bigger.
And with BAT at the helm, China shows no signs of slowing down.
Join Me in China
(1) Webinar with Dr. Kai-Fu Lee: Dr. Kai-Fu Lee — one of the world’s most respected experts on AI — will discuss his latest book AI Superpowers: China, Silicon Valley, and the New World Order. Artificial Intelligence is reshaping the world as we know it. With US-Sino competition heating up, who will own the future of technology? Register here for the free webinar on September 4th, 2018 from 11am - 12:30pm PST.
(2) Abundance Global - China: This year, I’m expanding A360 into three key emerging global markets: Central/South America (Rio de Janeiro, Brazil); MENA (Dubai, UAE); and Asia (Shanghai, China). Following my annual China Platinum Trip, A360 Shanghai will dive into China’s remarkable strides in AI and other newly emerging industries (As China Also),
Last year, China’s government put out its plan to lead the world in AI by 2030.
As Eric Schmidt has explained, “it’s pretty simple. By 2020, they will have caught up. By 2025, they will be better than us. By 2030, they will dominate the industries of AI.”
And the figures don’t lie.
With a $14 trillion GDP, China is predicted to account for over 35 percent of global economic growth from 2017 to 2019 — nearly double the U.S. GDP’s predicted 18 percent.
And AI is responsible for a big chunk of that.
PricewaterhouseCoopers recently projected AI’s deployment will add $15.7 trillion to the global GDP by 2030, with China taking home $7 trillion of that total, dwarfing North America’ $3.7 trillion in gains.
In 2017, China accounted for 48 percent of the world’s total AI startup funding, compared to America’s 38 percent.
Already, Chinese investments in AI, chips and electric vehicles have reached an estimated $300 billion.
Meanwhile, AI giant Alibaba has unveiled plans to invest $15 billion in international research labs from the U.S. to Israel, with others following suit.
Beijing has now mobilized local government officials around AI entrepreneurship and research, led by billions in guiding funds and VC investments.
And behind the scenes, a growing force of driven AI entrepreneurs trains cutting-edge algorithms on some of the largest datasets available to date.
As discussed by Kai-Fu Lee in his soon-to-be-released book AI Superpowers, four main drivers are tipping the balance in China’s favor:
Hungry entrepreneurs empowered by new tools
Growing AI expertise
Mass government funding and support
Let’s dive in.
1. Abundant Data
Perhaps China’s biggest advantage is the sheer quantity of its data.
Tencent’s WeChat platform alone has over 889 million daily active users. That’s more than the entire population of Europe.
Take mobile payments spending: China outstrips the U.S. by a ratio of 50 to 1.
Chinese e-commerce purchases are almost double U.S. totals.
In 2017 alone, China’s ride-hailing company Didi Chuxing completed 7.43 billion rides. Uber and Lyft rides combined? Under 4.4 billion that same year.
And when it comes to bike-sharing rides, Chinese companies are outpacing U.S. competitors at an extraordinary ratio of 300 to 1.
But China’s data advantage involves more than just quantity.
As China witnesses an explosion of O2O (online-to-offline) startups, their data is creating a new intelligence layer unparalleled in the West.
Whereas American users’ payment and transportation data are fragmented across various platforms, Chinese AI giants like Tencent have created unified online ecosystems that concentrate all your data in one place.
Take mobile payment data, for instance.
While the U.S. saw $112 billion worth of mobile payments in 2016, Chinese mobile payments exceeded $9 trillion in the same year.
That means mobile payment platforms like WeChat Wallet and Alipay have data on everything from your dumplings purchase from a street vendor to your recent 100 RMB donation to an earthquake relief fund. This allows them to generate complex maps charting hundreds of millions of users’ every move.
With the unequaled rise of bike-sharing startups like China’s ofo and Mobike, Chinese companies can now harness deeply textured maps of population movement, allowing them to intuit everything from your working habits to your grocery shopping routine.
And as China’s facial recognition capacities explode, these maps are increasingly populated with faces even when you’re not online.
As Chinese tech companies continue merging users’ online behavior with their physical world, the data they collect offers them a tremendous edge over their Silicon Valley counterparts.
This brings me to our second AI driver: hungry entrepreneurs.
2. Hungry Entrepreneurs
While China’s ‘copycat’ era saw a massive wave of mediocre-quality products and unoriginal mimicry, it also forged some of the most competitive, rapidly iterating entrepreneurs in the world.
Refined by fire, Chinese tech entrepreneurs have stopped at nothing to beat the competition, pulling every trick and tactic to smear, outpace and outsmart parallel startups.
Former founder-director of Google Brain, Andrew Ng noted the hunger raving among Chinese entrepreneurs: “The velocity of work is much faster in China than in most of Silicon Valley. When you spot a business opportunity in China, the window of time you have to respond is very short.”
But as China’s AI expertise has exploded, and startups have learned to tailor American copycat products to a Chinese audience, these entrepreneurs are finally shrugging off their former ‘copycat’ reputation, building businesses with no analogs in the West.
Now home to three of the Seven AI Giants (Baidu, Alibaba and Tencent), China also sees a thriving AI startup ecosystem.
Just this year, China’s computer vision startup SenseTime became the most valuable AI startup in the world. Capable of identifying your face, gauging your age and even your potential purchasing habits, SenseTime is now a world-class leader in facial recognition technologies, applying their AI to everything from traffic surveillance to employee authorization.
After a $600 million Alibaba-led funding round in April, SenseTime raised a further $620 million in its ‘Series C+’ round announced in May, now claiming a valuation of over $4.5 billion.
And SenseTime is not alone. As of this past April, China is home to 168 unicorns, collectively valued at over $628 billion.
But in order to leverage AI for billion-dollar startups, China counts on its growing expertise.
3. AI Expertise
It is important to note that China is still new to the game.
When deep learning got its big break in 2012 — when a neural network decimated the competition in an international computer vision contest — China had barely woken up to the AI revolution.
But in a few short years, China’s AI community has caught up fast.
While the world’s most elite AI researchers still largely cluster in the U.S., favoring companies like Google, Chinese tech giants are quickly closing the gap.
Already in academia, Chinese AI researchers stand shoulder-to-shoulder with their American contemporaries. At AAAI’s 2017 conference, an equal number of accepted papers came from U.S.- and China-based researchers.
We’ve also seen increased collaboration between China’s top tech firms and emerging student talent. Tencent, for instance, sponsors scholarships for students at a lab in Hong Kong’s University of Science and Technology, granting them access to masses of WeChat data.
Meanwhile, Baidu, Didi, and Tencent have all set up their own research labs.
China’s Face++ now leads the world in face and image recognition AI, beating out top teams from Google, Microsoft and Facebook at the 2017 COCO image-recognition competition.
Voice recognition software company iFlyTek has not only outcompeted teams from Alphabet’s DeepMind, Facebook and IBM Watson in natural-language processing, but has done so in its “second language” of English.
Now the most valuable AI speech company in the world, iFlyTek’s cutting edge technology could one day enable translation earpieces that instantaneously translate speech into any language.
But perhaps the greatest unifying force behind China’s skyrocketing AI industry is the country's very own central government.
4. China’s Government Directive
The day DeepMind’s AlphaGo beat top-ranking Chinese Go player Ke Jie has gone down in history as China’s “Sputnik Moment.”
Within two months of the AI’s victory, China’s government issued its plan to make China the global center of AI innovation, aiming for a 1 trillion RMB (about $150 billion USD) AI industry by 2030.
But there is a critical difference between China’s New Generation AI Development Plan (released in July 2017) and America’s 2016 AI strategic plan, released under the Obama Administration to encourage ramped-up AI R&D.
While the White House report got modest news coverage and a mildly enthusiastic response from the AI community, this was barely a hiccup in comparison to China’s clarion call.
When the CCP speaks, everyone listens.
Within a year, Chinese VC investors were pouring record sums into AI startups, surpassing the U.S. to make up 48 percent of AI venture funding globally.
Over the past decade, Chinese government spending on STEM research has grown by double digits year on year.
And China’s political system is set up such that local officials are incentivized to outcompete others for leadership in CCP initiatives, each striving to lure in AI companies and entrepreneurs with generous subsidies and advantageous policies.
Mayors across the country (largely in eastern China) have built out innovation zones, incubators and government-backed VC funds, even covering rent and clearing out avenues for AI startups and accelerators.
Beijing plans to invest $2 billion in an AI development park, which would house up to 400 AI enterprises and a national AI lab, driving R&D, patents and societal innovation.
Hangzhou, home to Alibaba’s HQ, has also launched its own AI park, backed by a fund of 10 billion RMB (nearly $1.6 billion USD). But Hangzhou and Beijing are just two of the 19 different cities and provinces investing in AI-driven city infrastructure and policy.
As I discussed last week, cities like Xiong’an New Area are building out entire AI cities in the next two decades, centered around autonomous vehicles, solar panel-embedded roads, and computer vision-geared infrastructure.
Xiong’an New Area is alone projected to take in over $580 billion in infrastructure spending over the next 20 years.
Lastly, local governments have begun to team with China’s leading AI companies to build up party-corporate complexes.
Acting as a “national team,” companies like Baidu, Alibaba, Tencent and iFlyTek collaborate with national organizations like China’s National Engineering Lab for Deep Learning Technologies to pioneer research and supercharge innovation.
Pulling out all the stops, China’s government is flooding the market with AI-targeted funds as Chinese tech giants and adrenalized startups rise to leverage this capital.
Once disregarded as a market of ‘copycats’ looking to Silicon Valley for inspiration and know-how, China’s AI ecosystem has long departed this stage.
Propelled by an abundance of government funds, smart infrastructure overhauls, leading AI research, and some of the world’s most driven entrepreneurs, China’s AI ecosystem is unstoppable.