AI Superpowers

by Kai-Fu Lee

  Accelerating that deployment will feature the same scramble by local government officials to stand out on AI. Along with competing to attract AI companies through subsidies, these mayors and provincial governors will compete to be the first to implement high-profile AI projects, such as AI-assisted doctors at public hospitals or autonomous trucking routes and “city brains” that optimize urban traffic grids. They can pursue these projects for both the political points scored and the broad social upside, spending less time obsessing over the downside risks that would scare away risk-sensitive American politicians.

  This is not an ethical judgment on either of these two systems. Utilitarian government systems and rights-based approaches both have their blind spots and downsides. America’s openness to immigration and emphasis on individual rights has long helped it attract some of the brightest minds from around the world—people like Enrico Fermi, Albert Einstein, and many leading AI scientists today. China’s top-down approach to economic upgrades—and the eagerness of low-level officials to embrace each new central government mandate—can also lead to waste and debt if the target industries are not chosen well. But in this particular instance—building a society and economy prepared to harness the potential of AI—China’s techno-utilitarian approach gives it a certain advantage. Its acceptance of risk allows the government to make big bets on game-changing technologies, and its approach to policy will encourage faster adoption of those technologies.

  With these national strengths and weaknesses in mind, we can construct a timeline for AI deployment and look at how specific AI products and systems are set to change the world around us.

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  The Four Waves of AI

  The year 2017 marked the first time I heard Donald Trump speak fluent Chinese. During the U.S. president’s first trip to China, he showed up on a big screen to welcome attendees at a major tech conference. He began his speech in English and then abruptly switched languages.

  “AI is changing the world,” he said, speaking in flawless Chinese but with typical Trump bluster. “And iFlyTek is really fantastic.”

  President Trump cannot, of course, speak Chinese. But AI is indeed changing the world, and Chinese companies like iFlyTek are leading the way. By training its algorithms on large data samples of President Trump’s speeches, iFlyTek created a near-perfect digital model of his voice: intonation, pitch, and pattern of speech. It then recalibrated that vocal model for Mandarin Chinese, showing the world what Donald Trump might sound like if he grew up in a village outside Beijing. The movement of lips wasn’t precisely synced to the Chinese words, but it was close enough to fool a casual viewer at first glance. President Obama got the same treatment from iFlyTek: a video of a real press conference but with his professorial style converted to perfect Mandarin.

  “With the help of iFlyTek, I’ve learned Chinese,” Obama intoned to the White House press corps. “I think my Chinese is better than Trump’s. What do all of you think?”

  iFlyTek might say the same to its own competitors. The Chinese company has racked up victories at a series of prestigious international AI competitions for speech recognition, speech synthesis, image recognition, and machine translation. Even in the company’s “second language” of English, iFlyTek often beats teams from Google, DeepMind, Facebook, and IBM Watson in natural-language processing—that is, the ability of AI to decipher overall meaning rather than just words.

  This success didn’t come overnight. Back in 1999, when I started Microsoft Research Asia, my top-choice recruit was a brilliant young Ph.D. named Liu Qingfeng. He had been one of the students I saw filing out of the dorms to study under streetlights after my lecture in Hefei. Liu was both hardworking and creative in tackling research questions; he was one of China’s most promising young researchers. But when we asked him to accept our scholarship offer and become a Microsoft intern and then an employee, he declined. He wanted to start his own AI speech company. I told him that he was a great young researcher but that China lagged too far behind American speech-recognition giants like Nuance, and there were fewer customers in China for this technology. To his credit, Liu ignored that advice and poured himself into building iFlyTek. Nearly twenty years and dozens of AI competition awards later, iFlyTek has far surpassed Nuance in capabilities and market cap, becoming the most valuable AI speech company in the world.

  Combining iFlyTek’s cutting-edge capabilities in speech recognition, translation, and synthesis will yield transformative AI products, including simultaneous translation earpieces that instantly convert your words and voice into any language. It’s the kind of product that will soon revolutionize international travel, business, and culture, and unlock vast new stores of time, productivity, and creativity in the process.

  THE WAVES

  But it won’t happen all at once. The complete AI revolution will take a little time and will ultimately wash over us in a series of four waves: internet AI, business AI, perception AI, and autonomous AI. Each of these waves harnesses AI’s power in a different way, disrupting different sectors and weaving artificial intelligence deeper into the fabric of our daily lives.

  The first two waves—internet AI and business AI—are already all around us, reshaping our digital and financial worlds in ways we can barely register. They are tightening internet companies’ grip on our attention, replacing paralegals with algorithms, trading stocks, and diagnosing illnesses.

  Perception AI is now digitizing our physical world, learning to recognize our faces, understand our requests, and “see” the world around us. This wave promises to revolutionize how we experience and interact with our world, blurring the lines between the digital and physical worlds. Autonomous AI will come last but will have the deepest impact on our lives. As self-driving cars take to the streets, autonomous drones take to the skies, and intelligent robots take over factories, they will transform everything from organic farming to highway driving and fast food.

  These four waves all feed off different kinds of data, and each one presents a unique opportunity for the United States or China to seize the lead. We’ll see that China is in a strong position to lead or co-lead in internet AI and perception AI, and will likely soon catch up with the United States in autonomous AI. Currently, business AI remains the only arena in which the United States maintains clear leadership.

  Competition, however, won’t play out in just these two countries. AI-driven services that are pioneered in the United States and China will then proliferate across billions of users around the globe, many of them in developing countries. Companies like Uber, Didi, Alibaba, and Amazon are already fiercely competing for these developing markets but adopting very different strategies. While Silicon Valley juggernauts are trying to conquer each new market with their own products, China’s internet companies are instead investing in these countries’ scrappy local startups as they try to fight off U.S. domination. It’s a competition that’s just getting started, and one that will have profound implications for the global economic landscape of the twenty-first century.

  To understand how this coming competition will play out at home and abroad, we must first take a dive into each of the four waves of AI washing over our economies.

  FIRST WAVE: INTERNET AI

  Internet AI already likely has a strong grip on your eyeballs, if not your wallet. Ever find yourself going down an endless rabbit hole of YouTube videos? Do video streaming sites have an uncanny knack for recommending that next video that you’ve just got to check out before you get back to work? Does Amazon seem to know what you’ll want to buy before you do?

  If so, then you have been the beneficiary (or victim, depending on how you value your time, privacy, and money) of internet AI. This first wave began almost fifteen years ago but finally went mainstream around 2012. Internet AI is largely about using AI algorithms as recommendation engines: systems that learn our personal preferences and then serve up content hand-picked for us.

  The horsepower of these AI engines d
epends on the digital data they have access to, and there’s currently no greater storehouse of this data than the major internet companies. But that data only becomes truly useful to algorithms once it has been labeled. In this case, “labeled” doesn’t mean you have to actively rate the content or tag it with a keyword. Labels simply come from linking a piece of data with a specific outcome: bought versus didn’t buy, clicked versus didn’t click, watched until the end versus switched videos. Those labels—our purchases, likes, views, or lingering moments on a web page—are then used to train algorithms to recommend more content that we’re likely to consume.

  Average people experience this as the internet “getting better”—that is, at giving us what we want—and becoming more addictive as it goes. But it’s also proof of the power of AI to learn about us through data and then optimize for what we desire. That optimization has been translated into massive increases in profits for established internet companies that make money off our clicks: the Googles, Baidus, Alibabas, and YouTubes of the world. Using internet AI, Alibaba can recommend products you’re more likely to buy, Google can target you with ads you’re more likely to click on, and YouTube can suggest videos that you’re more likely to watch. Adopting those same methods in a different context, a company like Cambridge Analytica used Facebook data to better understand and target American voters during the 2016 presidential campaign. Revealingly, it was Robert Mercer, founder of Cambridge Analytica, who reportedly coined the famous phrase, “There’s no data like more data.”

  ALGORITHMS AND EDITORS

  First-wave AI has given birth to entirely new, AI-driven internet companies. China’s leader in this category is Jinri Toutiao (meaning “today’s headlines”; English name: “ByteDance”). Founded in 2012, Toutiao is sometimes called “the BuzzFeed of China” because both sites serve as hubs for timely viral stories. But virality is where the similarities stop. BuzzFeed is built on a staff of young editors with a knack for cooking up original content. Toutiao’s “editors” are algorithms.

  Toutiao’s AI engines trawl the internet for content, using natural-language processing and computer vision to digest articles and videos from a vast network of partner sites and commissioned contributors. It then uses the past behavior of its users—their clicks, reads, views, comments, and so on—to curate a highly personalized newsfeed tailored to each person’s interests. The app’s algorithms even rewrite headlines to optimize for user clicks. And the more those users click, the better Toutiao becomes at recommending precisely the content they want to see. It’s a positive feedback loop that has created one of the most addictive content platforms on the internet, with users spending an average of seventy-four minutes per day in the app.

  ROBOT REPORTS AND FAKE NEWS

  Reaching beyond simple curation, Toutiao also uses machine learning to create and police its content. During the 2016 Summer Olympics in Rio de Janeiro, Toutiao worked with Peking University to create an AI “reporter” that wrote short articles summing up sports events within minutes of the final whistle. The writing wasn’t exactly poetry, but the speed was incredible: the “reporter” produced short summaries within two seconds of some events’ finish, and it “covered” over thirty events per day.

  Algorithms are also being used to sniff out “fake news” on the platform, often in the form of bogus medical treatments. Originally, readers discovered and reported misleading stories—essentially, free labeling of that data. Toutiao then used that labeled data to train an algorithm that could identify fake news in the wild. Toutiao even trained a separate algorithm to write fake news stories. It then pitted those two algorithms against each other, competing to fool one another and improving both in the process.

  This AI-driven approach to content is paying off. By late 2017, Toutiao was already valued at $20 billion and went on to raise a new round of funding that would value it at $30 billion, dwarfing the $1.7 billion valuation for BuzzFeed at the time. For 2018, Toutiao projected revenues between $4.5 and $7.6 billion. And the Chinese company is rapidly working to expand overseas. After trying and failing in 2016 to buy Reddit, the popular U.S. aggregation and discussion site, in 2017 Toutiao snapped up a France-based news aggregator and Musical.ly, a Chinese video lip-syncing app that’s wildly popular with American teens.

  Toutiao is just one company, but its success is indicative of China’s strength in internet AI. With more than 700 million internet users all digesting content in the same language, China’s internet juggernauts are reaping massive rewards from optimizing online services with AI. That has helped fuel the rapid rise of Tencent’s market cap—surpassing Facebook in November 2017 and becoming the first Chinese company to top $500 billion—and has allowed Alibaba to hold its own with Amazon. Despite Baidu’s strength in AI research, its mobile services lagged far behind Google. But that gap is more than made up for by upstarts like Toutiao, Chinese companies that are generating multibillion-dollar valuations by building their business foundation on internet AI. Massive profits will accrue to these internet companies as they become even better at holding our attention longer and harvesting our clicks.

  Overall, Chinese and American companies are on about equal footing in internet AI, with around 50–50 odds of leadership based on current technology. I predict that in five years’ time, Chinese technology companies will have a slight advantage (60–40) when it comes to leading the world in internet AI and reaping the richest rewards from its implementation. Remember, China alone has more internet users than the United States and all of Europe combined, and those users are empowered to make frictionless mobile payments to content creators, O2O platforms, and other users. That combination is generating creative internet AI applications and opportunities for monetization unmatched anywhere else in the world. Add China’s tenacious and well-funded entrepreneurs into the mix, and China has a strong—but not yet decisive—edge over Silicon Valley.

  But for all the economic value that the first AI wave generates, it remains largely bottled up in the high-tech sector and digital world. Bringing the optimization power of AI to bear on more traditional companies in the wider economy comes during the second wave: business AI.

  SECOND WAVE: BUSINESS AI

  First-wave AI leverages the fact that internet users are automatically labeling data as they browse. Business AI takes advantage of the fact that traditional companies have also been automatically labeling huge quantities of data for decades. For instance, insurance companies have been covering accidents and catching fraud, banks have been issuing loans and documenting repayment rates, and hospitals have been keeping records of diagnoses and survival rates. All of these actions generate labeled data points—a set of characteristics and a meaningful outcome—but until recently, most traditional businesses had a hard time exploiting that data for better results.

  Business AI mines these databases for hidden correlations that often escape the naked eye and human brain. It draws on all the historic decisions and outcomes within an organization and uses labeled data to train an algorithm that can outperform even the most experienced human practitioners. That’s because humans normally make predictions on the basis of strong features, a handful of data points that are highly correlated to a specific outcome, often in a clear cause-and-effect relationship. For example, in predicting the likelihood of someone contracting diabetes, a person’s weight and body mass index are strong features. AI algorithms do indeed factor in these strong features, but they also look at thousands of other weak features: peripheral data points that might appear unrelated to the outcome but contain some predictive power when combined across tens of millions of examples. These subtle correlations are often impossible for any human to explain in terms of cause and effect: why do borrowers who take out loans on a Wednesday repay those loans faster? But algorithms that can combine thousands of those weak and strong features—often using complex mathematical relationships indecipherable to a human brain—will outperform even top-notch humans at many analytical business tasks.
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br />   Optimizations like this work well in industries with large amounts of structured data on meaningful business outcomes. In this case, “structured” refers to data that has been categorized, labeled, and made searchable. Prime examples of well-structured corporate data sets include historic stock prices, credit-card usage, and mortgage defaults.

  THE BUSINESS OF BUSINESS AI

  As early as 2004, companies like Palantir and IBM Watson offered big-data business consulting to companies and governments. But the widespread adoption of deep learning in 2013 turbocharged these capabilities and gave birth to new competitors, such as Element AI in Canada and 4th Paradigm in China.

  These startups sell their services to traditional companies or organizations, offering to let their algorithms loose on existing databases in search of optimizations. They help these companies improve fraud detection, make smarter trades, and uncover inefficiencies in supply chains. Early instances of business AI have clustered heavily in the financial sector because it naturally lends itself to data analysis. The industry runs on well-structured information and has clear metrics that it seeks to optimize.

  This is also why the United States has built a strong lead in early applications of business AI. Major American corporations already collect large amounts of data and store it in well-structured formats. They often use enterprise software for accounting, inventory, and customer relationship management. Once the data is in these formats, it’s easy for companies like Palantir to come in and generate meaningful results by applying business AI to seek out cost savings and profit maximization.

  This is not so in China. Chinese companies have never truly embraced enterprise software or standardized data storage, instead keeping their books according to their own idiosyncratic systems. Those systems are often not scalable and are difficult to integrate into existing software, making the cleaning and structuring of data a far more taxing process. Poor data also makes the results of AI optimizations less robust. As a matter of business culture, Chinese companies spend far less money on third-party consulting than their American counterparts. Many old-school Chinese businesses are still run more like personal fiefdoms than modern organizations, and outside expertise isn’t considered something worth paying for.