Does your startup have a light touch or heavy touch?

There are some fundamental differences between Silicon Valley’s and China’s start-ups, and a big one is having what’s known as a light or heavy touch.

When a business has a light touch, it does one thing and leaves a lot of the particulars surrounding that service for others to deal with. This is the style of Silicon Valley companies like Uber, which connects people with a ride, but doesn’t deal with gas and car maintenance.

The Chinese equivalent of Uber is Didi, and Didi also owns the gas stations and repair shops that keep their rides in service. This heavy touch approach is preferred in China since it generally makes it more difficult for a copycat start-up to fully duplicate a service.

Having a heavy touch and controlling all aspects of a service can also lead to more data, which is vital to a good AI product. Already, China is sitting on the world’s biggest data goldmine. This is especially true when it comes to Tencent, the company behind WeChat, a certifiable super-app that people use for just about everything.

To understand the phenomenon of WeChat, it’s important to understand that most Chinese people are mobile-first internet users, which means that their first internet experience was through a cheap smartphone, rather than a PC. With this in mind, WeChat has become the mobile app that lets you do everything you’d want to do with a PC.

Thanks to mini apps within WeChat, you can not just chat with friends, but you can also order food for delivery, unlock a shared bike, buy groceries, buy movie tickets, purchase plane tickets, book a doctor’s appointment, order a prescription, and secure some stocks – all without leaving WeChat.

Many of these functions are made possible by another mini app: the WeChat Wallet, which was introduced on Chinese New Year 2014. Every New Year’s Day, there’s a tradition of sending loved ones a red envelope with money inside. WeChat allowed users to do this electronically, with no transaction fees, and it was such a success that upon launch, five million people linked their bank accounts to WeChat and sent 16 million electronic red envelopes.

Since the introduction of WeChat Wallet, China has become an increasingly cash-free society. That’s a lot of data under one roof, making it increasingly clear what people like to buy, where they travel and a whole lot more.

The arrival of AI in our everyday lives is coming in four waves. The first is internet AI, and it’s already here. YouTube recommends the next video for you to watch based on an AI algorithm, and services like the Toutiao app not only recommends articles, it automatically generates them as well.

As for who is the leader in internet AI, the author sees the US and China as neck and neck for now, but in five years, he predicts China will have a 60-40 advantage in terms of being able to dominate the market. This is thanks to China having more internet users than the US and Europe combined, and a population ready to make mobile payments to content creators. Already apps like WeChat Wallet allow people to send micropayments of a few cents to online content creators they like, and this type of environment is going to lead to innovative content from empowered creators – giving China the slight edge.

The second wave is business AI, and this is the category where the US really has an advantage. Business AI is already emerging, with algorithms making decisions on financial portfolios and bank loans. China does have some impressive mobile services already, like Smart Finance, which makes loans without taking into account financial history or your zip code. Instead, it uses unique metrics like how long it takes you to answer certain questions and how much battery power your device has. In doing so, it’s proven to be a reliable loan service for migrant workers and other populations underserved by traditional banks, and the percentage of defaults is only in the single digits.

However, one area of data China lacks is business records. Compared to China, the US has an impeccable history of record keeping, with databases full of banking, hospital and other business transactions. For this reason, the US is in great position for business AI and the author gives America a 90-10 advantage here. The five-year prediction is slightly better for China, with the US advantage cut to 70-30.

The third wave of AI is perception AI, which includes voice and facial recognition programs. China has an advantage here, due in part to cultural differences. Americans have many “Big Brother” fears about their image and voice being captured, while the Chinese are more agreeable to the idea of giving up some privacy in return for more convenience.

Perception AI has the potential to be an exciting area as it blurs the boundaries of online and offline. This is why this technology often falls under the category of online-merge-offline (OMO).

One OMO application we’ll be seeing more of is the smart grocery store. Imagine grabbing a grocery cart that scans your face, recognizes you and brings up your shopping list. In doing so, it greets you in the voice of your favorite actor. And since it scans everything you put in the cart, it can stop you before you reach the checkout counter if you forgot anything. It could even remind you of your loved one’s favorite brand of wine as you approach that section.

China is already making the Xiaomi line of products, which turn your home into a voice-activated, AI-enhanced environment. Due to a local manufacturing hub in Shenzhen, these products, which include speakers, refrigerators, rice cookers and vacuum cleaners, are very affordable. China’s manufacturing advantage and US privacy concerns, give China a 60-40 lead now, and the author expects it will grow to 80-20 in five years’ time.

The fourth and final wave is autonomous AI. So far, we haven’t even gotten close to the kind of technology that gives robots human-like intelligence, and it’s possible that we never will. But we do have drones, which are becoming more advanced and machines that can recognize the color of a ripe strawberry and gently pick them. Google and Tesla are also transforming our motorways with driverless cars, which will be rolled out in years to come.

So, the US currently has a big lead in autonomous AI, which the author puts at around 90-10, but China is eager to catch up. In fact, the Chinese government is very proactive in issuing AI-friendly policies and regulations, so it will be easier to implement this technology on a wide scale. Already, China is building a highway and an entire city the size of Chicago especially designed for AI vehicles. So in five years’ time, it’ll be closer to a 50-50 split.

Check out my related post: Are we ready to trust Artificial Intelligence?

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