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The Great Game: Exponential Tech’s Hidden Hand



Can anything really great grow in a short time?


Socrates to Glaucon


Last month I wrote a blog featuring a skeptic’s view of the potential for technology to automate vast numbers of jobs in the near-term. This month I’ve been drawn back to the possibilities of exponential technological change, thinking about startups like Ambi Robotics in the United States and Hai Robotics in China. “If deployed at scale,” writes a new piece on robotics in The Information, “the technology could reshape the employment of workers in supply chains around the world, from California to China.” For Oren Etzioni, CEO of the Allen Institute for Artificial Intelligence, robots are inevitable “job killers” in warehouses everywhere.


The more coffee I drank, the more I asked myself, “What if the automation skeptics are indeed wrong? What if the doubters fail to see what’s happening simply because it’s so pervasive? What if they’re caught up in a process of blinding speed they’ve mistaken for stillness?” As a recent piece pondering the flourishing of Big Tech during a time of pandemic put it, “It has been a tumultuous eighteen months, and even the tech companies are having trouble absorbing what happened.”


Get ready for more disorientation. Because one particular dynamic almost certain to hurtle us forward at ever faster rates is the one playing out between China and the United States. Two great empires are engaged in a new kind of Great Game, a struggle for global technological superiority. And the amount of money and focus devoted to this game over the coming decade will be enormous.


Europe too is part of the contest, as are countries like Canada, the UK, and Japan. But it’s China and the United States that are eyeing each other warily across a table where the future will be determined. One day China is launching a $47 billion chip investment fund, the next day Americans are announcing a National AI Research Resource Task Force. The need to win at all costs is certain to feed stunning advances.


And yet much of tech’s progress won’t happen in a straight line. Oftentimes, success will emerge from that which was initially perceived as failure. Paradoxically, speeding forward can take time, and in such cases the tech skeptics will always feel vindicated. But make no mistake, like a future hand hidden in the shuffle of a deck of cards, innovation awaits its moment to surprise. Such examples upset expectations in both directions, furthering a sense of vertigo in a tech-dominated world.


Future Advances Hidden in Failure: Tsinghua Unigroup


“THE FAILURE OF CHINA’S MICROCHIP GIANT TESTS BEIJING’S TECH AMBITIONS,” blares a headline from The New York Times last week.


First, some background.


Back in 2015, a semiconductor holding company called Tsinghua Unigroup, a subsidiary of a company controlled by the Tsinghua University, made news with a $23 billion bid to buy Micron, an American chip maker, in an attempt to vault into a leadership position in the microchip industry. Tsinghua Unigroup was aided in its efforts by a state-guided multibillion-dollar semiconductor fund.


Although that particular bid failed, Tsinghua would go on to take over some of China’s most promising microchip firms. Over the past decade Tsinghua morphed into one of China’s largest smartphone chip design companies. Tsinghua was looking formidable, thanks to China’s brand of state-directed capitalism.


Skip ahead to this month and that dramatic headline. Tsinghua suddenly announced that one of its creditors had initiated bankruptcy proceedings, raising the prospect that it could be broken up. China’s efforts at dominance in the semiconductor space seems to have suffered a serious setback. Great hopes seem to have been dashed.


But not so fast. Keep reading, keep thinking, and things get more interesting:


Yet to Chinese economic planners, it may not matter. Over the past two years, market incentives like the subsidies that bloated Unigroup’s books have fed a boom in all things microchip. According to an analysis by state-run media, China created 58,000 semiconductor firms between January and October 2020 — roughly 200 a day. While many of these companies will fail, the belief in Beijing is that a few may create breakthroughs. In other words, it’s the technology — not the finances — that counts.


Dan Wang, a technology analyst with research firm Gavekal Dragonomics offers the metaphor of a space program. When it comes to China’s chip ambitions, near-term profit is not the point. Rather, the ultimate goal is to train a generation of semiconductor engineers and then eventually achieve self-sufficiency in manufacturing memory chips. In other words:


The high-profile reckoning seems unlikely to change the direction of Chinese policy. This year, when officials publicly unveiled a five-year plan that meticulously mapped out key governance initiatives, they charted ambitious goals for the tech industry and emphasized its importance for national security. Reminiscent of Made in China 2025, a previous plan that helped shower Unigroup with government funding, the hope is that despite the waste, enough money will find its way to enough capable hands that magic will happen.


IBM Watson: The Stealthy March Forward


“WHAT EVER HAPPENED TO IBM’s WATSON?” asks another headline from a few days ago.


“IBM’s artificial intelligence was supposed to transform industries and generate riches for the company,” The New York Times declares. “Neither has panned out. Now, IBM has settled on a humbler vision for Watson.”


Again, some background is in order.


IBM is one of America’s greatest companies, a symbol of success of western capitalism. And famously, back in 1997, IBM’s Deep Blue computer defeated Gary Kasparov in chess. By 2006, the company was looking to build on that success and the idea for IBM Watson, a computer to tackle a question-answer game like “Jeopardy,” was born. Over two dozen scientists at IBM’s research lab would push natural language processing (NLP) and techniques for automated question answering.


Sure enough, five years later, Watson defeated folk hero Ken Jennings in a celebrated “Jeopardy” contest. AI, by then synonymous with Watson, dazzled the imagination. According to The New York Times:


This was only the beginning of a technological revolution about to sweep through society, the company pledged…. IBM poured many millions of dollars in the next few years into promoting Watson as a benevolent digital assistant that would help hospitals and farms as well as offices and factories. The potential uses, IBM suggested, were boundless, from spotting new market opportunities to tackling cancer and climate change. An IBM report called it ‘the future of knowing.’… Inside IBM, Watson was thought of as a technology that could do for the company what the mainframe computer once did — provide an engine of growth and profits for years, even decades.


But something happened on the way to Utopia. Over time, we’re told, IBM was surpassed by other Big Tech firms, and its vision for Watson was revealed as unrealistic:


Watson has not remade any industries. And it hasn’t lifted IBM’s fortunes. The company trails rivals that emerged as the leaders in cloud computing and AI — Amazon, Microsoft and Google. While the shares of those three have multiplied in value many times, IBM’s stock price is down more than 10 percent since Watson’s ‘Jeopardy!’ triumph in 2011…. The march of artificial intelligence through the mainstream economy, it turns out, will be more step-by-step evolution than cataclysmic revolution.


As in China with Tsinghua, high hopes for IBM Watson in the U.S. seem to have been dashed.


And yet. Read through the entire article and a sense of tangible, even significant progress begins to manifest. We see that in 2021, Watson offers a set of software tools that companies are using to build AI-based applications to, “streamline and automate basic tasks in areas like accounting, payments, technology operations, marketing, and customer service. It is workhorse artificial intelligence, and that is true of most AI in business today.”


One client, health insurer Anthem, uses Watson Assistant to automate more and more inquiries and become more and more efficient.


In fact, according to the Allen Institute for Artificial Intelligence, when comparing Watson’s natural language capabilities to those of Amazon, Google, and Microsoft, IBM’s solution performed at a level as good or better than all of them. Oren Etzioni, chief executive of the institute, even notes that, “I was quite surprised. IBM has gotten its act together, certainly in these capabilities.”


The World in 2030


A few years ago, China’s state-directed capitalism seemed to have created a juggernaut in Tsinghua Unigroup, only to arrive at the point where it might be broken up by the government. Still, it may be that the funding process that fed Tsinghua will continue to feed other firms, resulting in technological innovation nobody can yet anticipate.


Meantime, IBM, one of the ultimate symbols of American capitalism’s success, seemed on the verge on creating the all-knowing digital assistant that would change the world, only to eventually discover that the secrets to “the singularity” remain elusive. And yet Watson’s set of software tools has become an AI workhorse that makes a real difference for the companies that use it.


Got that? Failure is not always what it initially seems.


And the Great Game – from China to the United States – will continue, and the deck will be reshuffled again and again. At times, China and the U.S. will find occasion to show their cards, each to the other. The 2020s are sure to feature headlines announcing stunning technological advances – sometimes rising from the East, other times emerging from the West.


In some cases, however, both players in the game will think it wise to conceal the precise nature of the technological hand each might be holding. The idea of a hidden hand will take on another layer of meaning. Sometimes – as with last week’s news that the U.S. was accusing China of hacking Microsoft Exchange email server software, with China accusing the U.S. in turn of years of cyberattacks – it will grow contentious, as both sides accuse the other of cheating at the game. Other times, the dealing for key metallic elements essential to the tech industry like lithium, cobalt, and nickel (China is said to control 90% of the earth’s supply of earth minerals) will cause tensions to flare.


Meanwhile, as the world loses itself in ever more convenient and entertaining distractions enabled by ever improving technology, an odd lack of transparency between two different cultures will make us wonder what new advances might yet be in the offing. As we try and discern exactly what’s happening, the sense of vertigo already gripping societies will become more intense. We’ll float in an alluring kind of confusion. Like Richard Branson or Jeff Bezos summersaulting through a spaceship, many of us won’t know exactly how to react to our rapidly spinning world other than with nervous laughter.


By 2030, the awkward questions some once asked about a virology lab in Wuhan will seem in retrospect like a shuffle of a deck of cards in a game nobody seems to fully grasp, marked by a series of loaded questions shouted across a table at ever higher pitch. Just this month, Xi Jinping warned that any rival trying to stop China’s ascendance would, “crack their heads and spill blood on the Great Wall of steel built from the flesh and blood of 1.4 billion Chinese people.”


And then of course there is the growing worry from the RAND Corporation on systemic risk in the tech sector, how issues with one company might imperil others caught in this, our vast digital network. Either way, “This may be the pandemic’s ultimate tailwind: not just the future coming much faster to your company, but actively pushing your company faster into the future.”


Can the United States and China manage today’s Great Game responsibly? Will regulators in both countries positively impact the game of innovation or will they mess up the shuffle of the deck, scattering the cards in surreal ways?


At one point toward the end of Plato’s Republic, Socrates asks his friend Glaucon whether anything great can grow in a short time. It’s a question loaded with irony and hidden significance. The pressure to win the coming decade’s Great Game will spur technological advances, but whether the speed of the gamble will destabilize the table and the players sitting at it, undermining the very progress each player seeks, remains to be seen.



Image from gambling911.com

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