What China Thinks is a "Tech Company"

so how about that china tech thing going on right there's been a lot of news recently in the chinese technology space i've covered some of this in other videos but you can also google for additional detail not going to waste our time together going over that i think the ongoing crackdowns can be classified into a few piles some of these are specific to the companies themselves for instance the dd crackdown seems to be tied to how brashly they defied the chinese government's hints about their behavior some of this is related to maintaining the state banks's position as a core tenant of chinese industrial and financial policy regulations place on and financial and crypto for instance a few others are tied to promoting the government's goal of social equality quote unquote nudging them to move money over into more charitable use cases one example being tencent setting up a seven billion dollar fund for social causes and other stuff is related to antitrust for instance the choose one out of two tech giant rule where startups have to ally with either alibaba or tencent but a recent something that caught my eye is a set of new chinese internet regulations on the use of algorithms and what it says about the country's economic policy going forward that is what i want to write about for this video just a few jumbled thoughts on the chinese government's recent regulatory actions on its technology sector i'm definitely not the first to present these thoughts there are a bunch of other really thoughtful and not so thoughtful analyses about the situation i have a few selected ones in the description and a full list for patreon subscribers alright let us start i want to kick us off with the big question what is a tech company to the denizens of silicon valley the question is right up there with what is life and how much are you paying in rent in terms of triggering rounds of existential soul-searching the question matters because it matters to country-level industrial policy especially for a superpower like china or the united states where advanced technology yields tremendous economic and geopolitical value we know we want to encourage tech but what is tech actually one of these what is a tech company articles got posted to hacker news and naturally i delved into the comments there i felt the most common sentiment was something that i call tech company post-modernism the idea that nobody can ever define what a tech company is because it is all subjective and dependent on the person making the definition thus the discussion is moot and we should all just stay out of each other's mental internal affairs we should stop thinking in terms of tech companies and think of them in terms of companies that use tech with a high degree of success this whole thing is pointless it is basically about clarifying the definition of a financial slash mba term where do you draw the line at tech company versus some other classification and one more of course eventually all discussions of this nature devolve into the intricate definition of tech company and in the absence of one that is agreed upon bringing this whole thing up is pointless i have to bring this up because inevitably someone will say this in the comments but such postmodernist thinking is unhelpful and not something that i am too excited about so let us turn to some other sources i will turn to two of my favorite analysts for reference on this question ben evans who works for the vc fund a16z and ben thompson the strategy guy and fellow taiwan resident ben evans points out that netflix is a media company that uses tech in a particular way tesla is the same and so is any other company that uses technology to directly reach its consumer think warby parker and all those other d2c brands they are not tech companies but are instead using technology to go about their actual business we can go a little farther on our understanding of this idea with a ben thompson article he writes on the notion of platforms versus aggregators this is ultimately the most important distinction between platforms and aggregators platforms are powerful because they facilitate a relationship between third-party suppliers and end users aggregators on the other hand intermediate and control it a company that uses technology to make money with an aggregator type business model like ads is not a tech company but an ads company and this would still be the case even if the technology is quite advanced esoteric and intricate like artificial intelligence this gets us to the chinese regulation on algorithms when i first read that the government would regulate algorithms i thought that was weird after all china's advances in ai have gotten a lot of press the country is a genuine world leader in ai technology why regulate that but ai is very broad it can be used for different things and this piece of regulation does not address technology like computer vision facial recognition and the like companies like sensetime and hickvision for instance are free from this particular piece of legislation rather the regulation seeks to address content-based algorithms the use of generative or synthetic type personalized recommendation type ranking and selection type search filter type dispatching and decision making type and other such algorithmic technologies to provide information content to users in america that would mean things like your google search results youtube recommendations instagram feed uber ride sharing algorithms tick tock feed amazon search results netflix home page wechat game recommendations and more there is the standard discussion about national security and then after that algorithmic recommendation service providers may not set up algorithmic models that go against public order and good customs such as by leading users to addiction or high value consumption this refers to a specific sort of behavior one that harkens back to the platform's versus aggregator scenario i don't think china reads ben thompson nor do i think they're going to exhibit the same type nuance they probably don't care but the core point here is that china is trying to end aggregation type behavior they want to stop companies from trying to make money by aggressively hoarding and gating a bunch of content throwing an ai algorithm on top of it and calling it a day noah smith of noah opinion wrote on this beautifully we think google amazon and facebook are tech companies because they make a lot of profit and they are our american national champions but to china these companies these consumer tech companies they aren't tech companies a company that pays a stanford grad a quarter million dollars a year to figure out how to get people to click on an ad that is not tech and they do not deserve to be china's industrial national champions encouraging or rather not regulating aggregation type behavior from consumer tech companies leads to wasteful food fights president xi jinping last year presided over a meeting and group study session of the politburo the public bureau meeting called for strengthened anti-trust efforts and the prevention of disorderly expansion of capital disorderly expansion of capital that last phrase was really interesting in 2015 a taxi hailing company called dd qui-d held 80 market share in the industry uber began a chinese subsidiary and entered the country aggressively competing with didi the two companies rigorously competed over the next two years dd eventually won acquiring uber china in august 2016 but the battle left behind dramatic headlines bad behavior subsidies fraud and more and then there were the chinese bike sharing wars mobike and ofo deployed hundreds of bikes and spent millions on riders subsidies money flowed to the major players so easily that the management teams could not cope mobike was acquired by meitwan and since then has burned hundreds of millions of dollars ofo raised 2 billion was worth 3 billion and now is worth almost nothing bike manufacturers were stiffed and hundreds of bikes were carelessly left on the street a definite social cost and until recently it seemed like the chinese tech giants were gearing up for another massive clash in the group behind space you have meitwan alibaba and group by pioneer penduldua all preparing to spend millions to buy market share i think that has been called off though the government seems to have concluded that these consumer tech food fights happened in part because they receive more quote unquote disorderly capital than they actually needed too much vc funds sloshing around but it can also be true that these food fights happen because these consumer tech companies are so reliant on scale to make their money whether it be scaled up content services viewers drivers or whatever have you the more they acquire of it the more money they can make so they raise millions or even billions of dollars so that they can compete with one another in order to accomplish this and it is done very haphazardly gather the audience first and figure out what to do with it later probably throw an algorithm on it china's policy makers are trying to discourage this business model going forward stop wasting money on this and focused on country and society the question then i thought about was well so what should these companies be focusing on what do chinese policymakers think should matter back in march 2021 the people's bank of china published a really interesting paper about how the country should address its worsening demographics economically the paper first admits that pro-natal birth policies are not likely to work not controversial to say especially in asia i did a video about singapore's attempt to boost its birth rates world-leading generosity that has not yet really worked thus the country has to adapt its approach the authors looked at two developed countries with slowing birth rates the united states and japan first they briefly discuss how america uses immigrants to add to its population and build up skills in short supply not sure if that means china will start revising its immigration policies however they make a point to note that in nine other countries including germany net immigration has caused the natural population growth to drop which makes me think they aren't going to do this the second method comes from japan and is much more interesting it mentions how japan overcame weakening domestic markets by taking their excess capital or production and expanding overseas the author said that companies would first invest overseas in areas with cheaper labor costs for instance like how intel was one of the first american companies to invest in malaysia offshoring their labor to earn greater profits on their packaging processes they also mentioned that the multinationals would grow and garner profits from those same overseas markets developed countries used the overseas expansion of multinational companies as a starting point to realize their excess production and the results were very profitable for their home countries it is said that the last two decades have created another japan overseas the repatriated capital gains are estimated to be about three to four percent of its gdp and this money has become an important source of funds for its pension consider all the profits that sony has been able to repatriate to itself and its shareholders back in japan thanks to the overseas success of the playstation according to the paper it has been one of the reasons why japan has been able to stay rich despite little domestic growth over the years i reckon that china's eventual plan down the line is to follow in japan's footsteps build up capacity in certain high-value industries dominate them export their products abroad to countries for investment gains and repatriate those gains back home for economic growth the individual day-to-day events of the future nobody can predict but it seems like the broad scope of what is happening right now has been in the works for a while so we can expect other steps towards this goal in the days ahead to promote this the government is attempting to quell its internal economic conflicts and redirect those energies towards something else its policy makers have identified a series of core science-based industries in its overarching five-year economic plans the latest one includes expansion work on transportation new energy and the environment it also calls for r d work on quantum information and computing brain science semiconductors seed industry genetic research regenerative medicine biotechnology clinical medicine and health and deep space deep sea and polar exploration note that software is not on this list same with ai crypto especially is something that chinese policymakers have no interest in sorry guys companies conducting business in one of these industries will generally see favor those are the capital t capital c tech companies everything else is frivolous liberal artsy ridiculousness and those companies relying on aggregation and algorithmic curation to make money are really going to get short shrift going forward thanks for watching that's it for tonight if you enjoyed the video consider subscribing i would like to reach 100 000 subscribers someday and i want to spend a few moments to talk about the asian amateur patreon if you like what this channel does you can support the work by joining the early access tier early access members get to see new videos before they are released to the public there's also a general support tier and signing up for that would be amazing too so head on over to the patreon page and take a look i deeply appreciate anything you'd be able to sign up for want to send me an email drop me a line at john asinometry.com i love reading your emails introduce yourself suggest a topic or more until next time i'll see you guys later

Channel: Asianometry

Views: 75,364

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Id: 5tiyNS6-R0A

Length: 14min 12sec (852 seconds)

Published: Thu Sep 16 2021