Silicon Valley vs Chinese Startups
Silicon Valley and China have contrasting cultures
Silicon Valley startups tend to be mission-driven. Company mission statements are clean and lofty, detached from earthly concerns or financial motivations.
Chinese companies are first and foremost market-driven. Their ultimate goal is to make money, and they’re willing to create any product, adopt any model, or go into any business that will accomplish that objective. The core motivation for China’s market- driven entrepreneurs is not fame, glory, or changing the world. Those things are all nice side benefits, but the grand prize is getting rich, and it doesn’t matter how you get there.
While Socrates encouraged his students to seek truth by questioning everything, ancient Chinese philosophers counseled people to follow the rituals of sages from the ancient past. Rigorous copying of perfection was seen as the route to true mastery.
The psychological foundations of China’s internet ecosystem are based on:
* a cultural acceptance of copying
* a scarcity mentality
* the willingness to dive into any promising new industry
The most valuable product to come out of China’s copycat era wasn’t a product at all: it was the entrepreneurs themselves.
The effects of Chinese Government's "mass entrepreneurship and mass innovation" campaign that started in 2014 went far beyond mere office space and investment dollars.
The explosion of real-world internet services that blossomed across Chinese cities has been called the “O2O Revolution” short for “online-to-offline”. The concept is simple: turn online actions into offline services. E-commerce websites like Alibaba and Amazon had long done this for the purchase of durable physical goods. The O2O revolution was about bringing that same e-commerce convenience to the purchase of real-world services, things that can’t be put in a cardboard box and shipped across country, like hot food, a ride to the bar, or a new haircut.
Silicon Valley gave birth to one of the first transformational O2O models: ride-sharing. Chinese companies like Didi Chuxing quickly copied the business model. By late 2017, Didi Chuxing hit a valuation of $57.6 billion, surpassing that of Uber itself. After driving Uber out of the Chinese ride-hailing market, Didi has begun buying up gas stations and auto repair shops to service its fleet, making great margins because of its understanding of its drivers and their trust in the Didi brand.
The O2O revolution showcased an even deeper—and in the age of AI implementation, more impactful—divide between Silicon Valley and China— “going light” versus “going heavy.” The terms refer to how involved an internet company becomes in providing goods or services. They represent the extent of vertical integration as a company links up the on- and offline worlds.
When looking to disrupt a new industry, American internet companies tend to take a “light” approach. They generally believe the internet’s fundamental power is sharing information, closing knowledge gaps, and connecting people digitally. As internet-driven companies, they try to stick to this core strength. Silicon Valley startups will build the information platform but then let brick-and-mortar businesses handle the on-the-ground logistics. They want to win by outsmarting opponents, by coming up with novel and elegant code-based solutions to information problems.
In China, companies tend to go “heavy.” They don’t want to just build the platform—they want to recruit each seller, handle the goods, run the delivery team, supply the scooters, repair those scooters, and control the payment. And if need be, they’ll subsidize that entire process to speed user adoption and undercut rivals. To Chinese startups, the deeper they get into the nitty- gritty—and often very expensive—details, the harder it will be for a copycat competitor to mimic the business model and undercut them on price. Going heavy means building walls around your business, insulating yourself from the economic bloodshed of China’s gladiator wars. These companies win both by outsmarting their opponents and by outworking, outhustling, and outspending them on the street.
That willingness to go heavy—to spend the money, manage the workforce, do the legwork, and build economies of scale—has reshaped the relationship between the digital and real-world economies. China’s internet is penetrating far deeper into the economic lives of ordinary people, and it is affecting both consumption trends and labor markets.
Going heavy has given Chinese companies a data edge over their Silicon Valley peers, but it is mobile payments that has extended their reach even further into the real world and turn that data edge into a commanding lead. The mobile payment data will prove invaluable in building AI-driven companies in retail, real estate, and a range of other sectors.
Building China's alternate universe didn’t happen overnight. It required market-driven entrepreneurs, mobile-first users, innovative super-apps, dense cities, cheap labor, mobile payments, and a government-sponsored culture shift. It’s been a messy, expensive, and disruptive process, but the payoff has been tremendous.
...in the age of AI implementation, Silicon Valley’s edge in elite expertise isn’t all it’s cracked up to be. And in the crucial realm of government support, China’s techno-utilitarian political culture will pave the way for faster deployment of game-changing technologies.
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